Local govvies extended gains in December, spurred by an earlier-than-anticipated reopening of China’s economy. On the local front, signs of abating cost-push pressures on inflation also bode well for bonds. Malaysian Government Securities (MGS) yields shed between 2 bps and 15 bps across all maturities.

Worth noting is the sale of RM4.0 billion 3y Government Investment Issues (GII) reopening, issued on December 16, which drew impressive demand with a bid-to-cover ratio of 4.21x, the highest since June 2019.

In the meantime, foreign net selling of ringgit bonds decelerated further to RM874.6 million in December, compared to net outflows of RM1.0 billion in November and RM6.3 billion recorded in October. The outflow of foreign funds from the local bond market, mainly driven by massive redemption of Malaysian Islamic Treasury Bills (MITB), was partially offset by foreign buying in MGS and GII.

The continued foreign selling, however, pushed cumulative foreign flows in 2022 deeper into negative territory to -RM9.8 billion (2021: +33.6 billion), marking the first yearly foreign net outflow since 2018. Foreign holdings of the ringgit bonds outstanding fell to 22.2% as at end-2022, compared to 25.5% in the corresponding period last year.

In the local corporate bond market, total gross issuances rose sharply to RM43.8 billion (November: RM9.4 billion), the highest monthly level ever. Projek Lebuhraya Usahasama Berhad (PLUS), December’s largest issuer with an issuance of RM25.2 billion (full drawdown from its sukuk programme), contributed circa 57.5% of total issuances.