Local yields edge higher as tariffs and trade tensions cloud outlook
Malaysian Government Securities (MGS) and Government Investment Issues (GII)
- Yield Movement: MGS and GII yields rose modestly this week, climbing between 2.0 to 9.9 basis points (bps) across the curve. The 10-Y MGS edged up by 4.2 bps to 3.445%, while the 10-Y GII rose by 6.9 bps to 3.490%.
- Key drivers: The 10-year MGS yield rose after a weak auction, which drew a 1.52x bid-to-cover (BTC) ratio, far below the YTD average of 2.66x. August’s inflation edged up to 1.3% YoY (July: 2.0%) but had little impact. Sentiment turned cautious after the US announced steep tariffs on pharmaceutical imports and kitchen cabinetry, effective October 1, prompting broad selling across Asia, including local bonds. Geopolitical risks also weighed, with the IsraelPalestine conflict intensifying despite growing international recognition of Palestine’s statehood. Meanwhile, S&P’s reaffirmation of Malaysia’s sovereign rating with a stable outlook helped cushion the pressure, preventing yields from spiking more sharply.
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