Malaysia’s 2018 Bond Yield Falls to 8-Month Low Before Elections

The yield on Malaysia’s five-year government bonds dropped to an eight-month low on speculation Prime Minister Najib Razak will win elections on May 5 and continue with economic reforms. The ringgit was steady.

The FTSE Bursa Malaysia KLCI (FBMKLCI) index of stocks has risen 0.9 percent since Najib dissolved Parliament on April 3. The ruling Barisan Nasional coalition is confident of gaining another 15 federal seats due to infighting in the opposition camp, online newspaper Malaysian Insider reported on April 13, citing coalition information chief Ahmad Maslan. Najib has implemented a $444 billion, 10-year infrastructure spending plan to propel the nation to developed status by 2020.

“Malaysian bonds are being sought because investors are positioning on expectations that Barisan will win,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore

The yield on the 3.26 percent bonds due March 2018 was steady at 3.16 percent as of 10:55 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The yield touched 3.15 percent earlier, the lowest level for a benchmark five-year note since July 26.

The cost to insure five-year Malaysian government bonds using credit-default swaps has declined six basis points this month to 84 basis points, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The ringgit was little changed at 3.0398 per dollar, according to data compiled by Bloomberg. It has gained 1.8 percent this month. The currency’s 12-month non-deliverable forwards rose 0.2 percent to 3.0956, a 1.8 percent discount to the spot rate. One-month implied volatility, a measure of exchange-rate swings used to price options, fell six basis points to 6.91 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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