Malaysian 10-year bond yield rises to highest level since 2008

[KUALA LUMPUR] Malaysian government bonds fell, pushing the 10-year yield to the highest since 2008, as the weak ringgit, low oil prices and a political scandal sap demand.

The ringgit has plunged 18 per cent this year in the worst performance in Asia as falling crude prices reduce Malaysia's export revenue and investors sour on the country amid calls for Prime Minister Najib Razak to resign over political donations. A rout in global stock markets sparked by the devaluation of China's yuan on Aug 11 is worsening sentiment further.

The yield on the sovereign notes due Sept 2025 climbed five basis points to 4.45 per cent as of 11.22 am in Kuala Lumpur, according to Bursa Malaysia prices. It has risen 18 basis points in a four-day streak and is up 38 points so far this month. The five-year yield increased four basis points to 4.07 percent.

"The Malaysian government bond curve has been under pressure due to a confluence of a sharp weakening of the ringgit, low oil prices and negative sentiment surrounding Malaysia's political scene," said Winson Phoon, a Kuala Lumpur- based bond analyst at Maybank Investment Bank Bhd. "We expect the 10-year government bond yield to continue rising toward the 4.5 per cent area, if not higher, later this week." The ringgit gained 0.6 per cent to 4.2395 a dollar, according to prices from local banks compiled by Bloomberg. The currency fell 4.1 per cent over the previous four days. Malaysia's benchmark share index rose 0.9 per cent after dropping 2.7 per cent on Monday.

The ringgit strengthened as a rebound in Asian stocks aided sentiment, said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd in Singapore. The currency's gains may not last as fundamentally nothing has changed, he said.

BLOOMBERG