Malaysia’s 10-year bonds rose this month, pushing the yield down the most since July, as a deteriorating global economic outlook spurred demand for the relative safety of government debt.
Malaysia, which has the highest credit rating among Southeast Asian emerging markets, saw the yield on its 10-year notes reach a one-year low as reports showed slowing growth in China and declining German investor confidence. The Federal Reserve is on track to end its bond-buying program this month as the labor market improves, according an October 29 statement from the US monetary authority.
“The current global environment is conducive for countries with stronger credit outperforming,” said Kumar Rachapudi, a Singapore-based rates strategist at Australia & New Zealand Banking Group Ltd. “Long-end Malaysian government securities are benefiting from that.”
The yield on Malaysia’s 4.181 per cent sovereign bonds due 2024 fell eight basis points, or 0.08 percentage point, in October to 3.84 per cent in Kuala Lumpur, according to data compiled by Bloomberg. It climbed five basis points this week and two basis points today. The benchmark 10-year yield closed at 3.78 per cent on October 27, the lowest since November 2013.
Standard & Poor’s rates Malaysia A-, the fourth-lowest investment grade. That’s one level higher than Thailand, two above the Philippines and four better than Indonesia.
Malaysia’s gross domestic product will increase 5.5 per cent to six per cent this year, and between five per cent and six per cent in 2015, the finance ministry said in an October 10 report. The economy expanded 4.7 per cent in 2013.
The ringgit weakened 0.3 per cent this month and 0.1 per cent today to 3.2895 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 124 basis points, the biggest drop in a year, in October to 6.61 per cent, data compiled by Bloomberg show.-- Bloomberg