Net foreign buying of bonds higher in January at RM3.7b

KUALA LUMPUR: Net foreign purchases of ringgit bonds rose to RM3.7bil in January 2021, a slight increase for (December 2020: RM3.6bil), extending the inflow to the ninth consecutive month.

RAM Ratings Services Bhd said on Wednesday the sustained foreign demand in the previous quarter was underpinned by the purchase of Malaysia Government Securities (MGS) and Government Investment Issue (GII) among non-sticky investors.

These investors, it said, were notably foreign banks which raised their holdings by RM6.6bil quarter-on-quarter.

“On the other hand, sticky investors including foreign central banks/government, pension funds and insurers, steadily accumulated MGS and GII in 4Q 2020, advancing a healthy RM4.1bil (3Q 2020: RM7.1bil), ” it said in a statement.

RAM said bond yields in Asean markets generally trended upwards in January tracking the upswing in US treasury (UST) yields. This was triggered by increased “reflation” trade amid the anticipated economic recovery of the American economy.

It pointed out the 10-year UST yield came in at 1.1% as at end-January 2021 – the first time it breached the 1% level since February 2020 – amid persistent selling pressure.

The benchmark 10-year MGS yield rose 8.6 bps m-o-m to 2.68%. Upward pressure on the shorter end of the yield curve was, however, less pronounced, with the 1-year MGS yield inching up 2.1 bps to 1.75%.

Meanwhile, the 10-year yields of Thailand’s and Indonesia’s government bonds increased a respective 5.5 bps and 16.0 bps month-on-month in January.

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