PETALING JAYA: Ringgit bonds are expected to stay at “cruising altitude” and deliver returns that are close to the long-run average, analysts say.
This is based on the expectation of a flat overnight policy rate and supportive local supply-demand profiles, although not without turbulence.
In a note, Maybank Investment Bank Research (Maybank IB Research) forecast a total return of 3% to 5% for ringgit government bonds in 2025, despite risks from the external market.
Between 2014 to 2018, ringgit government bonds returned 3.3% to 5.5% per year, averaging 4.2%.
“Domestic investors should remain as key anchors for long durations given strong contributions received by pension funds and higher allocations for government-related bonds among insurers.
“The choppiness of foreign flows could persist but this likely affects the ringgit more than Malaysian Government Securities (MGS).
“Malaysia’s sovereign rating has upside potential although a positive rating action may require stronger institutional profiles and positive fiscal surprise,” said the research house.
As for private debt securities (PDS), Maybank IB Research noted that this year’s issuance is set to reach or exceed its RM120bil target.
For 2025, it pencilled in a gross PDS supply of RM125bil.
While economic activity is projected to stay robust, this has yet to translate to a notable rise in issuances thus far.
This is despite conductive funding conditions where credit spreads are tight and real-money liquidity appears still ample.
“PDS issuance growth has lagged the banking industry loan growth year-to-date.
“Rating migration looked neutral in the second half of 2024 with positive versus negative actions roughly balanced despite pockets of weaknesses.
“Looking ahead, we expect broadly stable credit conditions and credit spreads barring a sudden jump in supply or external shocks,” the research house added.
Maybank IB Research said local auction demand is likely to stay healthy.
