Malaysia RM3 billion bond sale draws weakest demand of 2025 as rate-cut hopes fade
The bid-to-cover ratio falls to 1.38 times, even lower than the September average of 2.06 times
[KUALA LUMPUR] An auction of Malaysian government bonds drew the weakest demand this year, as traders pared expectations for rate cuts and corporate issuances shifted investor interest away from sovereign debt.
The sale of RM3 billion (S$921 million) of bonds due in July 2055 got bids totaling RM4.1 billion, according to Bank Negara Malaysia. The bid-to-cover ratio fell to 1.38 times, even lower than the September average of 2.06 times, data compiled by Bloomberg showed.
Auction interest was impacted by “a lack of fresh catalysts, while some investors rotate out of government bonds into higher-yielding private debt securities amid a supply wave,” said Winson Phoon, head of fixed-income research at Maybank Securities “The weak tone may linger until new drivers emerge or yields correct to compelling levels.”
The waning demand comes as traders pare back expectations of further rate cuts. Swaps are pricing a hold over the next six months, compared with their expectations at August-end of 13 basis points of easing over the same horizon. An expected pick up in corporate bond supply in the fourth quarter is also weighing on the demand for the government debt.
An index of top-rated five-year Malaysian corporate bonds offers a premium of nearly 40 basis points over similar-dated government bonds.
Long-tenor bonds are under pressure globally. Investors are awaiting a 40-year sovereign debt sale in Japan on Tuesday after pro-stimulus lawmaker Sanae Takaichi’s near-certain elevation as Japan’s next prime minister led to a surge of as much as 17 basis points in the 40-year yield on Monday.
Longer-dated bond auctions are expected to see softer demand, as securities with a maturity of 10 years or more will account for the bulk of fourth-quarter issuances, CIMB Bank strategists wrote in a note last week. BLOOMBERG
Share with us your feedback on BT's products and services
