Appetite for Malaysian bonds increased last month after data showed robust economic performance in the final quarter of last year and inflation eased further in January. Bank Negara Malaysia left its benchmark interest rate unchanged for the second consecutive meeting earlier this month on expectations of a slowdown in global economic growth and amid uncertainty about the path the U.S. Federal Reserve will take at its meeting next week. Maybank's head of fixed-Income research, Winson Phoon, said Malaysian inflows likely concentrated in the front and mid tenors due to attractive dollar-hedged ringgit yields versus U.S. Treasuries, as well as better clarity over peak interest rate from Malaysia' central bank. Investors had been worried that the Fed might go back to its aggressive tightening path amid a resilient U.S. economy, but the banking crisis that has unfolded over the last week in the wake of the collapse of Silicon Valley Bank has changed the outlook for interest rates.
Investors are now wary of the risks of outflows in the near
term in Asian bonds.
"What's happening in the U.S. with so much volatility is
having a lot of residual effects on markets everywhere," said
Galvin Chia, emerging markets strategist at NatWest Markets.
"It will take months probably to reveal the true extent of
these shocks in the U.S. system ... that kind of worries me
because it may mean that we're not through this yet."
Meanwhile, most other countries in Asia saw outflows, with
Thai bonds witnessing $1.22 billion worth of net selling, the
biggest since March 2022, as worries over slowing exports and
rising trade deficit hurt sentiment.
Duncan Tan, a strategist at DBS Bank, said Asian bonds had
rallied on a plunge in U.S. rates and a weaker dollar, but the
near-term worries of severe risk aversion could trigger
outflows.
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Monthly foreign investment flows: Asian bonds ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting By Gaurav Dogra in Bengaluru and Ankur Banerjee in
Singapore; Editing by Subhranshu Sahu)
