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Malaysia's 10-Year Bonds Decline as Ringgit Slump Hurts Demand
By David Yong
Nov. 17 (Bloomberg) -- Malaysian government bonds fell for a fourth day on speculation a slump in the nation's currency will hurt overseas demand for local assets.
Ten-year notes snapped a two-week advance that pushed yields to the lowest since July 2003 this week as futures contracts showed traders reduced bets the ringgit will advance in the next 12 months. Bank Negara Malaysia Governor Zeti Akhtar Aziz yesterday said interest rates are at an appropriate level to support growth, damping rate-cut expectations.
``The ringgit has weakened a bit and the market is facing a correction,'' said Chue Soon Hoe, a treasury manager at Affin Investment Bank Bhd. in Kuala Lumpur. ``The central bank may want to keep rates steady this year pending more data on economic performance.''
The yield on the 4.262 percent note due September 2016 rose 4 basis points, or 0.04 percentage point, to 3.91 percent at 11:45 a.m. in Kuala Lumpur, according to central bank pricing. The price dropped 0.3, or 3 ringgit per 1,000 ringgit face amount, to 102.85.
The ringgit traded at 3.6585 per dollar, extending a 0.5 percent decline this week, making it fifth-worst performer this week among major Asia Pacific currencies tracked by Bloomberg. It will rise to 3.5795 in 12 months, compared with bets for 3.5588 on Nov. 13, according to non-deliverables futures contracts.
Bank Negara has kept its overnight lending rate between banks at 3.5 percent in the past four meetings, saying inflation has peaked. The central bank will hold its next monetary policy meeting on Nov. 24, a day after it reports on third-quarter economic performance.
Slower growth may fuel speculation of a rate cut as early as first quarter next year ``but a lackluster ringgit should prevent it,'' Standard Chartered Plc said in a note to clients yesterday. Malaysia will hold its rates until the third quarter of next year, it said.