Headwinds remain high in the Malaysian debt market; MYR remains Asia’s worst performer

The Malaysian debt market remains highly susceptible to the ongoing global headwinds with bond yields having increased by more than the rise in UST yields and the MYR being the worst performer in Asia (-6.1 percent against the USD) month-to-date in November.

The smaller than expected issue size of MYR2 billion (vs normal size of MYR3-3.5 billion) will provide some relief to the market in an otherwise highly challenging environment. The MYR bond market has been under strong selling pressure since Trump’s election victory. This reflects the high foreign ownership in the MYR bond market.

The country’s relatively low level of official reserves has limited the ability of the central bank to support the currency. At USD98.3bn, Malaysia’s reserves are down markedly from a record high of USD141.4bn in May 2013. Since the US election, the rise in MYR bond yields is among the highest in the region, even surpassing the increase in UST yields.

The last auction of the 10Y bond was held on August 25, with an issue size of MYR3bn and a bid/cover of 1.75x. The smaller issue will provide some relief in an otherwise highly challenging environment. Meanwhile, Malaysia will auction MYR2 billion of 10Y bonds on November 29.