KUALA LUMPUR: Foreign holdings of Malaysian bonds rose 4.9% to RM200.1bil, its highest level in seven months, in September, indicating that foreign investors' confidence may have returned.
According to Ram Ratings, net foreign inflows in September amounted to RM9.3bil, of which RM7.9bil were MGS and GII. This was owing to the strengthening of the ringgit against the USD, solid fundamentals as well as subsiding worries over geopolitical risk.
Expectations of tightening by the US Federal Reserve and the unveiling of President Trump's tax reform tax caused UST yields to trend upwards, especially towards end-September.
"Amid renewed expectations of another Fed rate hike, corporate bond issuance climbed up to RM18.1bil in September as issuers took the opportunity to lock in better rates ahead of the rate tightening," said RAM.
Year to date, issuance totaling RM84.4bil as at end-September was 90% of the lower end of RAM's projected RM95bil to RM105bil range for 2017.
Long-term government issuance came up to RM85.5bil as at end-September, in line with RAM's full-year projection of RM100bil to RM110bil.
The greenback may strengthen as the Fed has commenced its balance-sheet trimming in October, although this may be moderated by uncertainties, said RAM.
It added that the deceleration of the European Central Bank's bond-buying programme is expected to be gradual and that it is only likely to raise interest rates after 2018.
"Any delay by these two central banks in normalising monetary policy (already priced in by the market) is likely to heighten global market volatility," said RAM.
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