[KUALA LUMPUR] A Malaysian government bond auction on Monday drew the fewest bids of 2015 as prospects the US will raise interest rates this week for the first time in almost a decade deterred investors.
The 4 billion ringgit (S$1.3 billion) sale of sovereign notes due 2019 had a bid-to-cover ratio of 1.53 times and an average yield of 3.759 per cent, according to central bank data. That's the lowest ratio for a government bond auction since December, when a 3 billion ringgit offering attracted bids for 1.32 times, data compiled by Bloomberg show.
Higher US interest rates would reduce the appeal of emerging-market assets just as funds are exiting amid slowing economic growth in China. The ringgit is also languishing at its weakest level in more than 17 years as a slump in Brent crude weighs on government revenue for Asia's only major oil exporter. Overseas investors cut holdings of the nation's sovereign bonds to a five-month low in August.
"Normally, when it gets closer to a key event risk, players will stay on the sidelines," said Fakrizzaki Ghazali, a credit strategist at RHB Research Institute Sdn. in Kuala Lumpur. "If the Fed were to hike this week, there's a likelihood of more outflows from the Malaysian government bond market." The yield on sovereign bonds due in 2017 dropped seven basis points to 3.41 per cent as of 1:22 pm in Kuala Lumpur, according to Bursa Malaysia prices. That's up from 3.19 per cent at the end of the second quarter. The ringgit was little changed at 4.3195 a dollar on Monday and fell to 4.3798 on Sept 10, the lowest since January 1998.