Malaysia’s Bonds Break Five-Week Advance on Global Outlook

Malaysia’s 10-year government bonds recorded their first weekly decline in six, halting the longest run of gains since they were issued in January, as an improved global growth outlook reduced the allure of debt.

U.S. Treasury yields climbed this week after Caterpillar Inc., the largest construction equipment maker, posted earnings that exceeded analysts’ estimates. Separate reports showed manufacturing purchasing managers’ indexes in the euro region and China topped forecasts. Global funds cut holdings of Malaysian government bonds to 256.9 billion ringgit (78.3 billion) in August, from a record 257.2 billion ringgit in July, latest data from the central bank show.

“Yields on Malaysian debt are tracking U.S. Treasuries, which are rising because of optimism over the global outlook,” said Nizam Idris, head of strategy for fixed income and currencies at Macquarie Bank Ltd. in Singapore. “Earnings are stronger in the U.S., and the PMI for China and the euro-region are better than expected.”

The yield on the 4.181 percent sovereign bonds due July 2024 rose one basis point this week to 3.80 percent as of 5:14 p.m. in Kuala Lumpur, and was unchanged today, according to data compiled by Bloomberg.

The ringgit fell 0.1 percent today and this week to 3.2780 per dollar, data compiled by Bloomberg showed. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 76 basis points, or 0.76 percentage point, from Oct. 17 to 7.11 percent. It fell six basis points today.

Caterpillar yesterday reported third-quarter net income, excluding one-time items of $1.72 a share, surpassing the $1.35 average of estimates compiled by Bloomberg.

The Euro area manufacturing PMI came in at 50.7, data released yesterday by Markit Economics showed, more than the 49.9 estimated by economists. China factory PMI was at 50.4 compared with the 50.2 median forecast in a Bloomberg survey. A reading above 50 signals expansion.

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