Malaysia Bonds Rebound This Week on Higher Yields; Ringgit Falls

Malaysia’s five-year government bonds had their first weekly advance in a month after the highest yields in three years spurred demand for the securities. The ringgit weakened.

The five-year yield reached 3.71 percent on June 26, the most since June 2010, after Federal Reserve Chairman Ben S. Bernanke signaled an end to Treasury purchases that have fueled demand for emerging-market assets. Malaysia’s sovereign debt weathered the Fed-induced sell-off better than notes elsewhere in Southeast Asia as it offers the highest real returns in the region, Eastspring Investments said last week.

“The yield levels are attractive because they have risen quite a bit in the past couple of weeks,” said Nik Mukharriz Muhammad, fixed-income analyst at CIMB Investment Bank Bhd. in Kuala Lumpur. “Some of the local and foreign investors decided that it’s a bit more attractive for them.”

The yield on the 3.26 percent notes due March 2018 fell 12 basis points, or 0.12 percentage point, this week to 3.35 percent as of 4:31 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. That’s the biggest decline since the five days ended May 10. The rate was little changed today.

Malaysia’s five-year notes offer a real yield of 1.56 percent after accounting for inflation, compared with 1.14 percent for Thailand’s securities and 0.79 percent for Indonesian bonds. Malaysian bonds gained 0.2 percent in the last four days, a performance second only to China among 10 Asian debt markets tracked by HSBC Holdings Plc indexes.

Trade Data

The Southeast Asian nation’s exports fell 5.8 percent in May from a year earlier, the fourth consecutive monthly decline, Malaysia’s trade ministry said in a statement. That’s more than the median estimate of a 3 percent drop forecast by economists in a Bloomberg News survey.

The ringgit dropped 0.9 percent this week to 3.1885 per dollar, data compiled by Bloomberg showed. The currency declined 0.1 percent today. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell 26 basis points this week and 24 basis points today to 8.6 percent.

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