BIX ARTICLE
Malaysia Bond and Sukuk: Quarterly Report 1Q2022
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1Q2022 – Malaysian government bonds and sukuk remained robust despite the heightened expectations of an interest rate hike.
Foreign investors remained net buyers in the Malaysian bond market this quarter amid the rising inflationary pressure from the Russia-Ukraine War and even more FED rate hike. Bank Negara Malaysia (BNM) is expected to adjust the monetary policy settings, increasing OPR.
| GLOBAL MARKET Overview 3-year yield for the US Treasury rose to 148 bps q-o-q while the yield on the benchmark 10-year Treasury note rose 80 bps q-o-q. Investors might fret over concerns of rising inflation and tighter monetary policy. MY Government Bond Overview The MGS yield increased q-o-q, where the 3-year was up by 38 bps and the 10-year rose by 25 bps. As for GII performance, the q-o-q increase across the curve by 5 bps for 3-year and 38 bps for 5-year. Bank Negara is expected to raise the overnight policy rate by the second half of 2022. MY Corporate Bond & Sukuk Overview The corporate bond yields show fluctuations (q-o-q) throughout the first quarter of 2022. The yields rose 13 bps for 3-year and 26 bps for 10-year |
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GOVERNMENT BOND AUCTION
Overview
| The government bond auction for 1Q22 garnered an average BTC of 1.918x, a slight decrease from the previous quarter (4Q21: 1.994x). A reopening of GII 07/36 received the highest BTC at 2.574x. The new/reopening issuances for MGS/GII stood at RM 40.5 billion (4Q21: RM 40.86 billion). As of March 2022, the outstanding amount of MGS/GII was at RM926.34 billion (4Q21: RM 903.32). The demand for MGS and GII for quarter 1 was still strong as risk-off sentiment amid the possible OPR hike by BNM. |
1Q22 AUCTION
Source BNM, BIX Malaysia
| There will be ten reopening MGS and GII auctions in 2Q22. |
UPCOMING ISSUANCE 2Q22
Source BNM, BPAM, BIX Malaysia
FOREIGN HOLDINGS OF MGS AND GII
Overview
| The foreign inflow to MGS and GII tapered off in 1Q22 with net inflow amounted to RM4.28 billion, RM2.15 billion and -RM4.14 billion respectively in January, February, and March, despite foreign investors remain net buyers. As of March 2022, the total foreign holdings of MGS and GII stood at RM236.25 billion (December 2021: RM 233.96 billion), 1% increase from the previous quarter. In the near term, foreign investors could overweight on Malaysian bonds to seek cover as it seems to be offering the best profile to ride out the Russian-Ukraine war and the possibility of FED rate hike. |
CORPORATE BOND & SUKUK
Overview
| RM 20.85 billion corporate bonds and sukuk were issued in 1Q21 (4Q21: RM 49.13 billion), 58% decrease from last quarter. The government guaranteed rated bonds and sukuk were the most issued with RM 4.35 billion issuances. Non-rated bond is the second most issued with RM 3.92 billion issuances. By ratings (excluding government-guaranteed and non-rated), AAA-rated bonds were the most issued with RM 3.92 billion issuance (4Q21: RM 9.13 billion). The second big issuance was AA1/AA+-rated with RM 2.25 billion issuance (4Q21: RM 8.13 billion) For this quarter, the largest corporate issuance is Kuala Lumpur Kepong Berhad, KLK IMTN 4.170% 16.03.2032 of RM 1.5 billion. |
ISSUANCE 1Q2022
Source BNM, BIX Malaysia
RATING OUTLOOK
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In 1Q22, there is no defaulted or upgraded bonds/sukuk. However, there are three downgraded bonds/sukuk in this quarter.
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Source: MARC, RAM and BIX Malaysia
BOND STATISTICS
Overview
Outstanding Amount by Bond Classes
| As of March 2022, the outstanding amount of the Malaysian bond market was at RM 1.77 trillion. ( December 2021: RM 1.74 trillion). Breakdown by bond classes, the outstanding amount for government issuances stood at RM 926.34 billion. The corporate and quasi-government outstanding amounts were at RM 515.58 billion and RM 327.54 billion, respectively. |
Overview
Outstanding Amount by Principal and Bond Classes
| The outstanding amount of the Government conventional bond was at RM 493.04 billion and the Government Islamic Bond (Sukuk) at RM 433.3 billion, as of March 2022. The conventional Quasi-govt outstanding amount stood at RM 19.05 billion whereas its Islamic counterpart stood at RM 308.49 billion. For corporate issuance, the conventional bond outstanding amount was at RM 133.32 billion and its Islamic sukuk was at RM 382.36 billion. |
Disclaimer
The information contained in this report is prepared from data believed to be correct and reliable at the time of issuance of this report. While every effort is made to ensure the information is up-to-date and correct, the Company does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information contained in this report and accordingly, neither the Company nor any of its affiliates nor its related persons shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.
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