Market Summary
Yield Movements

Between 1 September and 31 October, yields for local currency (LCY) government bonds in Malaysia rose for most tenors. Yields for bonds with maturities between 3 years and 20 years rose while yields for maturities of 2 years or less fell. Investor cautiousness and the United States Federal Reserve’s hawkish tone has possibly diminished buying interest for Malaysia’s longer-tenor LCY government bonds, causing yields at the long-end of the curve to edge higher.

Size and Composition

Malaysia’s LCY bonds outstanding increased 1.4% quarter-on-quarter (q-o-q) and 8.1% year-on-year to reach MYR1,263 billion (USD299 billion) at the end of September. The buoyant Malaysian bond market was driven by both the government and corporate segments, with much of the growth coming from corporates. Government bonds outstanding summed to MYR671 billion on an increase of 0.1% q-o-q, while corporate bonds outstanding summed to MYR593 billion on an increase of 2.9% q-o-q. Total sukuk (Islamic bonds) outstanding amounted to MYR733.7 billion on an increase of 2.4% q-o-q.

Policy, Institutional and Regulatory Developments

On 11 September, Bank Negara Malaysia set out additional hedging flexibility to further facilitate foreign exchange risk management as part of its measures to promote development of the Malaysian financial market. In its Supplementary Notice No. 3 on Foreign Exchange Administration Rules, Bank Negara Malaysia allows registered nonbank, nonresident market participants to forward hedge crude palm oil futures and options on crude palm oil futures for the purpose of managing ringgit exposure arising from such contracts.