Foreign investors flock to Malaysian bonds with RM10.2bil inflow in April

New Straits Times

20-05-2025

KUALA LUMPUR: Foreign investors remained as net buyers of the Malaysian bond, with net inflows surging to RM10.2 billion in April, more than triple the RM3.2 billion recorded in March.
According to RAM Ratings Service Bhd (RAM Ratings), the inflows were mainly driven by strong demand for Malaysian Government Securities (MGS) and Government Investment Issues (GII), which collectively drew RM9.7 billion in net foreign investment, up sharply from RM3.0 billion in March.
Additionally, it said Malaysian Treasury Bills (MTB) and Islamic Treasury Bills (MITB) attracted RM480 million in net inflows — a notable reversal from the RM252 million net outflow seen in the previous month.
RAM Ratings noted that the sweeping set of "reciprocal" tariffs announced at the start of last month sparked a sharp surge in market turmoil, with the volatility index published by the Chicago Board Options Exchange rising to a high not seen since the start of the Covid-19 pandemic.
"Heightened risk aversion contributed to a weakening of the ringgit against the USD in the first week of April, as the local currency swiftly depreciated to 4.50 against the greenback as of 9 April from 4.43 as of end-March," it said.
RAM Ratings said the 10-year US Treasury (UST) yield soared to a high 4.48 per cent as of April 11 from 4.23 per cent as of end-March.
Market jitters, however, soon subsided amid signs of easing US-China trade tensions.
"The ringgit rose to 4.32 against the US dollar at the end of April while the 10-year UST yield retreated to 4.17 per cent," it said.
Meanwhile, RAM Ratings noted that at the May Federal Open Market Committee meeting, the Fed kept the interest rate unchanged at 4.25 per cent 4.5 per cent, citing persistent inflationary pressures and economic uncertainties stemming from recent tariff implementations.
The rating agency said market consensus now expects the Fed's first rate cut to come in September, with a 71 per cent probability priced in.
Adding further complexity to global yield dynamics, RAM Ratings said Moody's downgraded the US sovereign credit rating from Aaa to Aa1 on 16 May, citing long-term fiscal concerns.
"This contributed to renewed weakness in US treasuries, triggering another round of repricing of US government debt.
"The 10-year UST yield jumped to 4.46 per cent as of May 19, from 4.17 per cent as of end-April, as markets digest the downgrade alongside concerns of reduced foreign appetite for US debt.
"The selloff pressure was relatively contained within the US as MGS yields largely trended sideways, with the benchmark 10-year MGS yield sitting at 3.64 per cent as of 19 May from 3.68 per cent as of end-April," it added.