Malaysian Bonds, Ringgit Advance as U.S. Data Temper Fed Bets

Malaysia’s 10-year government bond yield fell the most in almost seven weeks and the ringgit strengthened after U.S economic data tempered speculation policy makers are set to scale back stimulus.

The world’s largest economy expanded at a revised 1.8 percent annualized rate from January through March, less than a prior estimate of 2.4 percent, a report showed yesterday. Federal Reserve Bank of Richmond President Jeffrey Lacker said yesterday the central bank isn’t close to trimming its $3.47 trillion balance sheet after Chairman Ben S. Bernanke said June 19 the Fed may taper its bond-buying later this year.

“The U.S. data raised the question of whether the Fed had over-estimated the recovery momentum,” said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. “The policy landscape has become less critical of risk assets.”

The yield on the 3.48 percent bonds due March 2023 declined 10 basis points, or 0.1 percentage point, to 3.68 percent as of 5:06 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. That’s the biggest drop since May 10.

Overseas funds hold 32 percent of Malaysian sovereign debt, compared with 34 percent for Indonesia and 19 percent for Thailand, according to government and finance ministry data.

Goldman Sachs Group Inc. cut its forecast for Malaysia’s 2013 economic growth to 5.1 percent from 5.3 percent on slowing Chinese demand, according to a June 25 research note.

The ringgit climbed 0.8 percent to 3.1739 per dollar, paring its loss this month to 2.5 percent, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped 42 basis points to 9.3 percent.

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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