Malaysian 10-Year Bonds Decline as Shares Favored; Ringgit Drops

Malaysia’s 10-year bonds dropped, pushing the yield to a one-week high, on speculation investors are favoring riskier assets such as stocks amid signs the economy is improving.

Exports rose 5.4 percent in June from a year earlier, after climbing 6.7 percent in May, the government reported today. That beat the 3.1 percent gain estimated by economists in a Bloomberg News survey. The central bank forecasts the economy will grow as much as 5 percent this year, compared with 5.1 percent in 2011. Foreign funds bought 3.3 billion ringgit ($1.1 billion) of local shares in July, the most since March, exchange data show.

“Bonds are falling because investors see opportunities in equities,” said Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur. “If growth prospects improve, yields could rise further.”

The yield on the 3.418 percent notes due August 2022 increased one basis point, or 0.01 percentage point, to 3.41 percent as of 4:39 p.m. in Kuala Lumpur, according to Bursa Malaysia. That was the highest level since Aug. 2.

The ringgit declined 0.2 percent to 3.1040 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, rose five basis points to 6.30 percent.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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