MALAYSIA: Curve May Flatten Through Oct. Given No BNM Meet
* The September yield surge in Malaysia that took yields to YTD highs continues to retrace as the factors that underpinned the move higher, diminish. * The MGS market had been quiet all year but the removal of one word by the BNM. Removal of the Word "Appropriate" from previous statements suggested it was entirely comfortable keeping interest rates at current levels, removing any lasting hopes of rate cuts. Dropping this word implies the central bank is starting to question the long-term suitability of 2.75 and as global interest rates rise, they may too. This as the FED rate hike loomed. * The MGS 3-yr peaked at 3.58% on Sept 14 - having traded in a 3.25% - 3.30% range for much of the prior few months. Today the 3-Yr is down a further 1bp at 3.45% * The 10-yr peaked at 4.18% and with today's move -4.2bps lower, is at 3.86% * This sees the 3/10 curve back at around +43bps, from its peak at +62bps. * I am still not convinced that the BNM does anything this year, leaving room potentially further moves lower in the front end whilst the 10-yr remains exposed to the latest headlines and outlook for oil markets. * The BNM does not meet in October and by all accounts, domestic fears of ra
* The September yield surge in Malaysia that took yields to YTD highs continues to retrace as the factors that underpinned the move higher, diminish. * The MGS market had been quiet all year but the removal of one word by the BNM. Removal of the Word "Appropriate" from previous statements suggested it was entirely comfortable keeping interest rates at current levels, removing any lasting hopes of rate cuts. 75 and as global interest rates rise, they may too.
This as the FED rate hike loomed. 30% range for much of the prior few months. 86% * This sees the 3/10 curve back at around +43bps, from its peak at +62bps. * I am still not convinced that the BNM does anything this year, leaving room potentially further moves lower in the front end whilst the 10-yr remains exposed to the latest headlines and outlook for oil markets.
* The BNM does not meet in October and by all accounts, domestic fears of rate hikes have abated. For the long end, other than oil, watch for the evolving story on the fiscal situation and its impact on supply. For now - fiscal risks appear contained and are likely pushed to 2027 - and could see the curve flatten further from here.