Fed Cut Hopes May Slow Malaysian Bond Outflows
'There are signs that the worst of the outflows may be behind us,' said Shier Lee Lim, FX and macro strategist at Convera Singapore. 'For the remainder of the year, the outlook for Malaysia's bonds will depend on broader emerging market risk appetite, the direction of US interest rates and clarity on local policy.'
Following weaker-than-expected US nonfarm payroll figures in July, swap markets are now pricing in at least two Federal Reserve interest-rate cuts this year. Analysts say looser US monetary policy and a softer dollar could revive appetite for higher-yielding emerging market assets such as Malaysian bonds.
Cooling domestic inflation may further support sentiment, with June consumer prices rising at their slowest pace since February 2021.
According to Convera, the combination of falling US rates, a weaker greenback and easing inflation could help stem foreign selling pressure in Malaysia's bond market in the coming months.
Bloomberg
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