Rate cut may not save ringgit bond rally as index outflow looms

The amount of negative-yielding bonds globally have jumped 47% to more than $12 trillion this year as signs that the Federal Reserve and the European Central Bank will ease spurred a bond rally.

KUALA LUMPUR: A storm is brewing for Malaysian bonds as the threat of an US$8bil (RM33bil) outflow and a falling ringgit erode sentiment, even in the face of a likely interest-rate cut.

The biggest rally in ringgit bonds in three years, fuelled by bets for policy easing, has ground to a halt. FTSE Russell sparked the latest – and perhaps biggest – worry when it said last week it may remove Malaysia from its world bond index on concern about market liquidity, triggering fears of a capital flight.