Market Summary

Yield Movements

The local currency (LCY) government bond yield curve of Malaysia shifted upward for all tenors between 31 August and 14 October. Short-term bond yields grew an average of 19 basis points (bps), while those of longer-term bonds expanded an average of 45 bps. The yields jumped as Bank Negara Malaysia continued its interest rate hike in September to temper inflationary pressure. The 10-year and 2-year government bond yield spread increased from 70 bps to 78 bps during the review period.

Size and Composition

Malaysia’s LCY bond market grew 2.6% quarter-on-quarter (q-o-q) and 7.8% year-on-year in the third quarter of 2022. It reached a size of MYR1,853.0 billion (USD399.6 billion) at the end of September. Increases in both outstanding government and corporate bonds contributed to this expansion. Total outstanding sukuk (Islamic bonds) jumped 3.9% q-o-q during the review period, spurred by expanding stocks of both government and corporate sukuk. Issuance of LCY bonds increased 7.2% q-o-q as issuance of government bonds grew.

Policy, Institutional and Regulatory Developments

On 30 September, Malaysia raised MYR4.5 billion from its first Sustainability Government Investment Issues to fund the government’s social and green projects under its Sustainable Development Goals Sukuk Framework. The fundraising activity showcased the commitment of the Malaysian government towards a sustainable economy. The fixed income security also served as a new benchmark bond in the Islamic bond market of Malaysia.