Malaysian Interest-Rate Swaps Climb Before Central Bank Review

Malaysian interest-rate swaps rose toward the highest level in more than two years before the central bank reviews monetary policy tomorrow.

Bank Negara Malaysia will leave its benchmark interest rate unchanged at 3 percent, according to all 23 economists surveyed by Bloomberg. Citigroup Inc. and HSBC Holdings Plc predict borrowing costs will be increased later this year. Consumer prices rose 3.4 percent in January from a year earlier, the fastest pace since October 2011, after the government raised fuel and power tariffs.

One-year interest-rate swaps climbed two basis points, or 0.02 percentage point, to 3.45 percent as of 5:36 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The contracts reached 3.46 percent earlier, the highest since August 2011.

“There are some people in the market who do think they will hike rates,” said Mirza Baig, head of foreign-exchange and interest-rates strategy at BNP Paribas SA in Singapore. “We think they will stay on hold for the rest of this year. Incoming growth data has been disappointing both from China and the U.S., so the global recovery people have penciled in is not turning out to be that strong.”

The Malaysian government reported last month the economy grew 4.7 percent in 2013, the least since 2009, amid signs of slowing expansion in China and the U.S., two of the country’s biggest overseas markets.

The ringgit climbed 0.1 percent to 3.2721 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell four basis points to 7 percent.

Malaysian exports increased 7.9 percent in January from a year earlier, after gaining 14.4 percent in December, according to the median estimate of economists in a Bloomberg survey before data due March 7.

The yield on the 4.181 percent sovereign notes due July 2024 was steady at 4.12 percent, according to data compiled by Bloomberg.

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