Government Securities (MGS) closed generally lower in February

Consumer confidence rises as inflation dips to 20yr-low in Malaysia

Malaysian Government Securities (MGS) closed generally lower in February, reflecting global bond market trends as US Treasuries (UST) declined amid geopolitical tensions and expectations of Federal Reserve rate cuts.

The MGS 10-year yield ended the month at 3.49%, slightly below January’s close, after rising to 3.567% in the first 10 days before easing. The MGS 3-year yield edged higher to 3.02%, while overall issuance rose to RM15 billion, supported by strong auction demand with bid-to-cover ratios averaging 2.51 times.

Government Securities

The movement in Malaysian yields mirrored the UST, where the 10-year yield fell 29 basis points to 3.94%. US markets reacted to the nomination of Kevin Warsh to replace Jerome Powell, signaling a more hawkish stance early in the month. Later, geopolitical risks and new US tariff measures boosted demand for safe-haven assets, compressing yields further. Investors continue to price in two Fed rate cuts this year, which could pressure the US dollar and reinforce demand for Treasuries.

UST yields has weakened

For Malaysia, the correlation with UST yields has weakened, with domestic liquidity and fiscal fundamentals playing a stronger role. Fiscal consolidation, subsidy reforms, and SST expansion are expected to bolster investor confidence. Analysts note that Malaysia’s stable inflation, resilient economy, and current account surplus provide a solid backdrop for MGS, making them attractive to both local and foreign investors.

With global uncertainties persisting, MGS yields are likely to remain anchored, offering a favorable risk-reward profile even as US monetary policy shifts. – Source: MBBS

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