Bond Market Sentiment Boosted By Advance 4Q GDP Growth
Malaysian government bond yields moved higher over the past week, with both Malaysian Government Securities (MGS) and Government Investment Issues (GII) registering modest increases, amid weak demand at a recent bond auction and rising global rate pressures.
According to Kenanga Research, MGS and GII yields rose between 0.5 and 4.8 basis points (bps) during the week. The benchmark 10-year MGS yield climbed 3.1 bps to 3.539%, while the 10-year GII yield increased 1.2 bps to 3.523%.
Local yields were pressured by a lacklustre reopening of the 15-year MGS, which recorded a bid-to-cover ratio of just 1.94 times, signalling weak investor appetite for longer-dated tenors. On the global front, risk sentiment softened after former US President Donald Trump announced a 25% tariff on goods from countries engaging with Iran, adding to geopolitical uncertainty.
Concerns over the independence of the US Federal Reserve, coupled with rising Japanese government bond yields, also contributed to upward pressure on global interest rates. Domestically, Malaysia’s industrial production index (IPI) growth for November slowed as momentum eased across key sectors, dampening near-term optimism despite a broadly constructive outlook for 2026.
In terms of fund flows, foreign investors recorded net sales of approximately RM1.9 billion in Malaysian government bonds last week, even as equities saw modest net inflows of RM42.5 million. Kenanga noted that this divergence suggests investors are reducing duration exposure and boosting liquidity, rather than making a decisive shift into risk assets.
Looking ahead, Malaysia’s 4Q25 advance gross domestic product (GDP) growth of 5.7%, together with upcoming trade and consumer price index (CPI) data, is expected to reinforce confidence in the country’s growth trajectory. Expectations that Bank Negara Malaysia will maintain the overnight policy rate (OPR) at 2.75% at its upcoming Monetary Policy Committee meeting are also likely to support market sentiment.
Kenanga added that while there is scope for sustained inflows and a modest easing in yields in the coming week, global uncertainties — particularly escalating geopolitical risks — could temper risk appetite and reintroduce volatility into bond markets.
