Malaysian Default Swaps Fall, Ringgit Gains on Growth Optimism

Malaysian credit-default swaps fell to a one-month low, the ringgit gained and government bonds advanced as an improving outlook for Southeast Asia’s third- largest economy bolstered confidence in the nation’s assets.

Exports increased 2.3 percent in November from a year earlier, compared with a 3.2 percent decline in October, according to the median estimate in a Bloomberg survey before data due tomorrow. Moody’s Investors Service raised the long- term foreign-currency bond ceiling for Malaysian issuers to A1 from A3 yesterday, citing the country’s “healthy” current- account surplus. U.S. lawmakers passed a bill last week to avert more than $600 billion of spending cuts and tax increases.

“Malaysian growth could remain fairly resilient,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. “The fiscal cliff issue finding some kind of relief has meant that markets have moved away from bracing for a more catastrophic outcome.”

Five-year credit-default swaps on Malaysian debt fell one basis point to 68 yesterday in New York, the lowest since Dec. 3, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

The ringgit strengthened 0.1 percent to 3.0403 per dollar as of 9:15 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped eight basis points to 5.24 percent.

Malaysian industrial production increased 5.9 percent in November, the most since May, according to the median estimate in a Bloomberg survey before data due Jan. 10.

Government bonds advanced for a second day. The yield on the 3.314 percent notes due October 2017 fell one basis point, or 0.01 percentage point, to 3.21 percent, according to Bursa Malaysia.

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net

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

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