Summary

• Domestic consumption remained resilient, while the softer decline in exports together with better-than-expected economic performance and stable industrial production growth in China may indicate a potential rebound in Malaysia’s manufacturing sector.
• Despite a temporary pause in the dollar index’s rally against major currencies, the Ringgit ringgit continued its weakening trend in October. The local bond market adopted a quieter and cautious stance as foreign investors closely tracked the depreciating Ringgit ringgit movement in the absence of domestic catalysts.
• The local bond market reacted strongly to rising US Treasury (UST) yields fuelled by a hawkish outlook from the Federal Reserve officials’ commentaries and mounting fiscal concerns. Rising geopolitical tensions could either lead to higher yields should it result in inflation concerns or lower yields due to safe-haven flows, resulting in a volatile market.
• Continued easing of domestic inflation and anticipation of an unchanged Bank Negara Malaysia (BNM) policy rate may provide stability to local bond yields. Mixed economic signals will prompt policymakers in advanced economies to exercise caution in concluding the tightening cycle.