Southeast Asian Yield Curves Steepen as Rate Cut Bets Intensify
Malaysia's 10-year yield climbed as the central bank held rates steady and infrastructure spending plans stoked fiscal deficit concerns, widening the term spread over 2-year notes.
Catalysts
- ▼ Malaysia held rates but signaled future hikes
- ▼ Infrastructure spending plans boosted deficit fears
Risk Factors
- ▲ Commodity price rebound could improve fiscal outlook
- ▲ Global risk appetite could support demand for EM bonds
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Why are Malaysia's long-end yields rising?
Rising long-end yields reflect fiscal deficit worries from large infrastructure projects and a central bank that is reluctant to cut rates amid persistent inflation.
Is Malaysia's steepening sustainable?
If oil prices recover, Malaysia's fiscal position may improve, potentially curbing the steepening, but for now, the trend remains intact.