Market Summary

Yield Movements

Yields on local currency (LCY) government debt securities in Malaysia moved higher across the curve between 1 June and 31 August, with an average increase of 15 basis points. Upward pressure reflected continued tensions in the Middle East and concerns that larger fuel subsidies could cause the 2026 fiscal deficit to exceed the government's target.

Local Currency Bond Market Size and Issuance

Malaysia's LCY bond market increased 3.0% quarter-on-quarter (q-o-q) to MYR2.2 trillion at the end of the second quarter (Q2) of 2026, following a 1.7% q-o-q rise in the first quarter (Q1). Government and corporate bonds outstanding increased 3.2% q-o-q and 2.7% q-o-q, respectively. Overall LCY bond issuance also increased in Q2, driven largely by a 46.1% q-o-q rise in corporate bond issuance.

Sustainable Bond Market

Malaysia's sustainable bond market reached USD22.4 billion at the end of June after increasing 11.1% q-o-q, compared with a 3.1% q-o-q rise in Q1. Sustainability bonds accounted for 68.5% of the total at USD15.4 billion, and corporate issuers represented 84.4% of the market. Corporate sustainable bonds remained concentrated in longer maturities, with 59.8% carrying tenors above 5 years, lifting the size-weighted average tenor to 8.5 years from 8.1 years in Q1.