Market Summary

Yield Movements

Malaysia's local currency (LCY) government bond yield curve shifted downward between 15 June and 15 August. Yields of short-term tenors (from 1 month to 1 year) decreased an average of 36 basis points (bps) while yields of longer-term tenors (from 2 years to 30 years) fell an average of 45 bps. The movement was driven by Bank Negara Malaysia's (BNM) overnight policy rate cut in July as a response to persistent negative economic effects of the coronavirus disease (COVID-19) pandemic. The yield spread between 2-year and 10-year government bonds expanded from 69 bps to 70 bps during the review period.

Size and Composition

The LCY bond market of Malaysia expanded 1.8% quarter-on-quarter (q-o-q) in the second quarter of 2020, reaching a size of MYR1,554.8 billion (USD362.7 billion), supported by expansions in LCY government and corporate bonds. The LCY government bond market grew 3.2% q-o-q as outstanding central government bonds increased. Meanwhile, LCY corporate bonds outstanding jumped 0.2% q-o-q. Total outstanding Islamic bonds at the end of the review period grew 1.0% q-o-q.

Policy, Institutional and Regulatory Developments

On 29 July, small and medium-sized enterprises were assured by BNM that banks are committed to addressing their concerns regarding loan repayments. Flexible arrangements will be made on a case-to-case basis to help individuals and businesses affected by the COVID-19 pandemic manage their ability to repay debt obligations.