Foreign Holdings of Malaysian Bonds Drop in September

Foreign ownership of Malaysian government bonds dropped in September for the first time in 12 months, with the outflows likely to have been triggered largely by debt maturities.

Overseas holdings decreased 2.6 percent to 208.3 billion ringgit ($49.6 billion), after climbing to a record in August, according to central bank data released in Kuala Lumpur Monday. Sovereign notes worth 19.7 billion ringgit matured last month, according to Maybank Investment Bank Bhd.

Malaysian government bonds have rallied over the past year, benefiting from a global yield hunt in an environment where almost $12 trillion of investment-grade debt offers sub-zero yields. The yield on Malaysia’s benchmark five-year notes has retreated 42 basis points in the past 12 months and reached the lowest level since May 2013 last month.

“The decline in foreign holdings is primarily maturity-driven,” said Winson Phoon, a fixed-income analyst at Maybank Investment Bank in Kuala Lumpur. The outlook is neutral “with a cautious tone for foreign demand” due to external uncertainties such as the U.S. presidential election, talk of tapering of asset purchases by the European Central Bank and a potential Federal Reserve interest-rate increase, he said.

Foreign ownership of Malaysian sovereign and corporate bonds and bills dropped 3.4 percent to 238.5 billion ringgit in September, the first decline in four months, according to central bank data.

The yield on government securities due 2021 was steady at 3.27 percent as of 4:33 p.m. in Kuala Lumpur after rising two basis points last week, according to prices from Bursa Malaysia. The 10-year yield fell one basis point to 3.58 percent. The ringgit rose 0.2 percent to 4.1485 per dollar.

(Source corrects September debt holdings data in story published on Oct. 10.)
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