Malaysia debt could do with more central bank love amid deficit fears

While policy makers have already lowered the reserve requirement ratio for local banks by 100 basis points to 2% and included bonds as reserve-compliant assets, there’s room to go further. The ratio was cut as low as 1% in 2009 during the global financial crisis.

MALAYSIAN bonds are starting to show some concern about the nation’s rising fiscal deficit. It may be time for the central bank to respond.

The nation’s 10-year yield briefly climbed above 3% this week, from as low as 2.79% in May, after the authorities pledged to pump in another 35 billion ringgit ($8.2 billion) to counter the impact of the coronavirus.

That’s on the top of the 260 billion ringgit announced earlier. The government is now forecasting the fiscal deficit to widen to 5.8% to 6% of gross domestic product, the most in a decade.