Local yields hold steady post-FOMC; geopolitical risks emerge as key driver
Malaysian Government Securities (MGS) and Government Investment Issues (GII)
- Yield Movement: MGS and GII yields fell sharply across the curve, declining between 4.5 bps to 28.9 bps. The 10-Y MGS yield fell 26.7 bps to 3.917%, and the 10-Y GII yield dropped 21.4 bps to 3.939%.
- Key drivers: MGS yields reversed sharply lower after the FOMC's anticipated 25 bps hike removed event risk and fuelled duration demand. Brent eased as Saudi Arabia restored part of its East-West pipeline capacity, easing inflation concerns. August exports surged 45.5% YoY, signalling strong domestic fundamentals. Bilateral swap arrangement with Japan and initiatives on local currency settlements and India market access added support. The government's decision to raise the electricity relief threshold also reinforced the domestic macro backdrop, encouraging renewed buying across the MGS curve.
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