Malaysian bonds retreat as US yields, oil prices rise

KUALA LUMPUR, 29 SEPTEMBER 2026 —

Malaysian Government Securities yields climbed 1 to 4 basis points last week after a rally, reversing earlier gains as US Treasury yields and oil prices rose, CIMB Securities said.

The 10-year MGS yield moved back toward 4% from a week-low of 3.89%, while the 30-year yield increased 4 basis points to 4.40%. The three-month KLIBOR rose 3 basis points to 3.51%, reflecting tighter term funding conditions ahead of the RM29.5 billion Government Investment Issues redemption on September 30.

Banks are building liquidity buffers ahead of quarter-end funding needs, CIMB’s senior economist Lim Yee Ping and research head Michelle Chia noted. The overnight rate held steady at 2.75%, indicating stress in longer-term rather than short-term liquidity.

Demand for the seven-year MGS 04/33 reopening on September 21 remained strong despite market weakness. The RM5 billion auction drew RM10.84 billion in bids, a 2.168x bid-to-cover ratio, with offshore investors leading demand.

Lim and Chia attributed the strong auction to the bond’s attractive relative value against the 10-year benchmark, with the seven-year to 10-year spread at just 2-3 basis points. However, the subsequent rise in US yields has tempered near-term momentum, they said.

Investors will now test appetite for longer-dated debt with the RM3 billion public tender and RM2 billion private placement of the 30-year GII 01/56 today. Sustained demand at the long end will determine whether recent steepening can be maintained, the economists said.

Malaysia’s August fiscal data, due September 30, will show how higher oil prices affect government subsidies and progress toward the 3.5% 2026 deficit target ahead of the 2027 Budget on October 9.

The Melaka state election, triggered by the assembly’s dissolution on September 23, adds near-term political uncertainty, though CIMB expects limited market impact. The Election Commission will set the timetable at its October 7 meeting.

Globally, US economic data will dominate this week, with August job openings, September PCE inflation, and September non-farm payrolls due between September 29 and October 2. Fed officials and ECB President Christine Lagarde are also scheduled to speak, while oil prices and geopolitical risks remain key inflation drivers.

In ASEAN, Indonesia’s September inflation and August trade data drop October 1, while Thailand’s Constitutional Court rules today on a ballot secrecy challenge ahead of its February 8 election. CIMB said global oil prices and US data will remain the primary drivers across regional markets.

Related: Kuala Lumpur