Lockdown Will Take Toll on Malaysia’s Already Steep Yield Curve
- Pandemic concerns, rate-cut bets are causing curve to steepen
- Malaysia bonds among most vulnerable to reflation trade: study
Vehicles travel along a near-empty road during a nationwide state of emergency in Kuala Lumpur, on Jan, 13.
Photographer: Samsul Said/BloombergThis article is for subscribers only.
Malaysia’s yield curve has raced higher over the past year and is now near the steepest since 2017. The return to a strict lockdown and delays to vaccine distribution mean it may have further to run.
The spread between the nation’s three-year and 10-year sovereign debt climbed above 90 basis points last week, up from just 16 basis points before the coronavirus selloff in March. The tighter lockdown announced Jan. 11 and the imposition of a state of emergency the following day, are likely to intensify concern that Malaysia will fall short of its growth and fiscal consolidation targets this year, pushing up longer-term yields.