Page 89 - SC Annual Report 2018 (ENG)

Securities
Commission
Malaysia
ANNUAL
REPORT
2018

Chart 8
MGS spreads tightened in 2018
MGS benchmark yield curve (end-period) 10-year versus 3-year MGS spread

5.0 75
70

4.5 65
60

% 4.0 bps 55

50
3.5 45

40
3.0 35
3 Year 5 Year 7 Year 10 Year 15 Year 20 Year
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

Dec-17 Jun-18 Dec-18

Source: Bloomberg

but with varying performances for longer- and relatively small increases compared to others in the
shorter-term tenures. Yields on shorter tenures region.
trended upwards over trade tension concerns and
EMEs pressure while longer-term tenures trended Foreign holdings in domestic bonds started to
downwards on the back of solid macroeconomic decline in the first half of the year (Chart 9), in
fundamentals. line with the shift in global liquidity away from the
EMEs. Nonetheless, foreign outflows were largely
The upward pressure on sovereign bond yields was absorbed by local institutions on the back of
not limited to Malaysia as yields ended the year ample domestic liquidity. Total foreign ownership
higher across other ASEAN bond markets after of domestic bonds stood at RM184.8 billion,
having fluctuated significantly throughout the year. representing 13.1% of total bonds outstanding
The spread between the 10-year UST and 10-year in 2018. Foreign holdings in MGS accounted
MGS however continued to narrow on the back of for 38.4% of total MGS outstanding, reflecting
strong fundamentals in the Malaysian economy and investors’ long-term positive outlook on Malaysia.
solid demand from local institutional investors. The Meanwhile, foreign ownership in corporate bonds
10-year UST/MGS spread narrowed to 139 bps as was little changed despite the outflows. Corporate
at end-2018 (Chart 9). Overall, notwithstanding the bonds owned by foreigners remained concentrated
increase in Overnight Policy Rate (OPR) in January on highly rated papers ranging from mid- to long-
2018, Malaysian sovereign bond yields recorded term tenures.

PART 4 »» CAPITAL MARKET REVIEW AND OUTLOOK | 79

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