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Malaysian Bonds, Ringgit Drop on Fed Stimulus Tapering Concern

Malaysia’s 10-year bond yield rose to an eight-week high as signs of an economic pickup in the U.S. bolstered the case for the Federal Reserve to reduce stimulus. The ringgit fell to a one-month low.

Jobless claims in the world’s largest economy declined to 331,000 in the week ended Nov. 9 from 336,000 in the preceding period, according to the median estimate of economists in a Bloomberg survey ahead of data due Nov. 14. A report last week showed American employers added more workers in October than analysts projected. Global funds held 28 percent of Malaysian sovereign bonds in September, compared with 31 percent for Indonesia and 17 percent for Thailand, official figures show.

“Given the renewed concerns of tapering after the strong non-farm payrolls number, international investors are likely reducing their Malaysian government securities portfolio,” said Kumar Rachapudi, a senior rates strategist at Australia & New Zealand Banking Group Ltd. in Singapore.

The yield on the government’s 3.48 percent securities maturing March 2023 climbed seven basis points, or 0.07 percentage point, to 3.85 percent in Kuala Lumpur, according to data compiled by Bloomberg. That was the highest level since Sept. 12.

The five-year sovereign yield advanced four basis points to a six-week high of 3.58 percent.

The ringgit slipped 0.3 percent to 3.2099 per dollar, after dropping 0.7 percent yesterday, data compiled by Bloomberg show. It touched 3.2120, the weakest since Oct. 9. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 10 basis points to 9.36 percent. The Bloomberg U.S. Dollar Index climbed 0.4 percent.

Favoring Ringgit

Morgan Stanley favors the ringgit, Taiwan’s dollar and the South Korean won over Indonesia’s rupiah and the Indian rupee after last week’s U.S. jobs report, Geoffrey Kendrick, the bank’s Hong-Kong based head of Asian currencies and interest-rate strategy, wrote in a research note yesterday.

U.S. employers added 204,000 workers to payrolls in October, a figure that topped the most optimistic forecast in a survey of economists and followed a 163,000 increase in September that was larger than initially estimated, a Nov. 8 report showed. Federal Reserve Bank of Atlanta President Dennis Lockhart said the same day the central bank will consider reducing its bond-buying program at next month’s review.

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