Malaysia's five year bond yield falls to lowest since 2013

  • Economy
  • Monday, 18 Jan 2016

KUALA LUMPUR: Malaysian government bonds rose, driving the five-year yield to its lowest level since 2013, on speculation the nation's debt is luring investors amid a selloff in stocks.
The yield on the notes has dropped 18 basis points in the past month, while the benchmark stock gauge lost 1.5 percent. Malaysia's 10-year bonds, which are rated the fourth-lowest investment grade by Standard & Poor’s, offer the second-highest yields among Southeast Asia's three biggest economies. The government will take measures to cut spending, including studying the privatization of projects, the finance ministry's top bureaucrat Mohd Irwan Serigar Abdullah said Wednesday.

“In this part of the world, Malaysian bonds offer higher returns vis-a-vis the ratings,” said Nik Mukharriz Muhammad, a Kuala Lumpur-based fixed-income analyst at the investment- banking unit of CIMB Group Holdings Bhd., the country's second- biggest lender by assets.

The yield on the five-year securities dropped for a fifth day, declining one basis point to 3.42 percent as of 12:41 p.m. in Kuala Lumpur, the lowest level for a benchmark of that maturity since November 2013, according to prices from Bursa Malaysia. The 10-year bond also fell one basis point to 4.16 percent, the lowest since November. The FTSE Bursa Malaysia KLCI Index of shares slipped 0.6 percent in a third straight day of losses.

The ringgit fell for a third day, weakening 0.2 percent to 4.4095 a dollar, as Brent crude extended declines after international sanctions on Iran were lifted. The currency is headed for its longest run of declines since November. Malaysia's government stands to lose 300 million ringgit ($68 million) for every $1 drop in the price of the commodity, according to government estimates.

Bank Negara Malaysia will keep the overnight policy rate unchanged at 3.25 percent at a review on Thursday, according to all 12 economists in a Bloomberg survey. The central bank has kept borrowing costs unchanged since July 2014 and Governor Zeti Akhtar Aziz said in Hong Kong on Monday that the monetary policy is accommodative.

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