Malaysia Bond And Sukuk: Quarterly Report 3Q 2018

3Q2018 – Positive domestic condition

Malaysia Government Security (MGS) and Government Islamic Instrument (GII) yields shows improvement over the quarter with respect to the 7 to 10 years tenure, which can be attributed to greater clarity by the new elected government on new implementation of cost saving and recovery measures.

Even though the bond market is supported by favorable domestic conditions, there will be in a period of cautious trading ahead of the Malaysian Budget announcement on 2 November 2018.

GLOBAL MARKET

Overview
Bond investor saw a turbulent 3Q 2018 despite a strong US economy and resilience job data. However, the ongoing Fed’s balance sheet reduction may exert upward pressure on bond yields together with additional issuances of $1.5 trillion tax reduction package coupled with $300b of additional stimulus and anticipation of a Fed hike in Sept.

MY Government Bond

Overview
Sell down of the US bond market lead to partial reversal of EM risk appetite which paved the way for rallies in regional bond markets including Malaysia with the 10y MGS down to 4.07% month-end and an improvement of 13 basis point compared to last quarter.
 
MY Corporate Bond & Sukuk

Overview
Corporate bond and sukuk in the AAA spectrum strengthen during the quarter on the 5 to 10-year tenure. 3Q18 issuances reached RM20.8b as at end 3Q 2018 down slightly by about 18% from 2Q 2018’s RM25.4b

Sources: US Treasury, BNM, BPAM & BIX Malaysia


GOVERNMENT BOND AUCTION

Overview
Total Government bond matured during the quarter is RM16.36 billion while new and reopening auction issued at RM26 billion. The take up during the quarter is decent with the average BTC at 2.33 with the highest for 7-year MGS 03/25 at 3.302 BTC and lowest demand for 5 year GII 11/23 at 1.817 BTC.

Source BNM, BIX Malaysia

For 4Q2018, there will be 2 GII maturing for October and November amounting to of RM7.5 billion. There will be 2 auction of MGS and 4 GII for next quarter.



CORPORATE BOND & SUKUK
Overview
Malaysia Corporate bond and Sukuk issuance for 3Q18 is lower by 18% at RM20.8 billion compared with 2Q18 issuance at RM25.4 billion and 48% lower compared to 4Q17 issuance at RM40 billion. Lower issuance in the 3rd quarter may be due to issuer waiting for more certainty from new government during the early part of the quarter as issuance start to pick up in August and September.


Source BNM, BIX Malaysia

Rating Outlook
There are 3 issuer rating downgraded during 3Q 2018.
1. Talam Transform Berhad
2. Kuveyt Turk Katilim Bankasi AS