Summary

•  The latest retail and exports data suggest that a slower domestic economy in 2Q2023 is imminent given the anticipated slowdown in the global economy.
• On the bond market, while MGS commands positive yield differentials with the UST, the spread has narrowed significantly since 2022.
• The continuing divergence of interest rate policy between Malaysia and the advanced economies could exert some pressure on the local bond market in the near term, stemming from the risk of a reversal in the positive foreign flows amid yield chasing activities among investors.
• Furthermore, a more aggressive tone on rate tightening in the advanced economies could heighten global recession risk concerns and lead to continued safe haven flows among investors.