Published August 14, 2008

Malaysian bond yields rise to 2-year high at auction

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(SINGAPORE) Malaysia sold RM3.5 billion (S$1.48 billion) of five-year Islamic bonds at the highest yield in more than two years as investor demand waned.

The government issued the notes due February 2014 at an average yield of 4.273 per cent at an auction in Kuala Lumpur, Bank Negara Malaysia said on its website.

That was its highest cost to sell five-year securities since it issued them at 4.635 per cent in July 2006. The notes yielded 4.27 per cent before bidding closed at 11:30am in Kuala Lumpur.

'The sale suffered from a poor response, probably because it was limited to local banks,' said Noor Azman Mohamed, a bond trader at Affin Investment Bank Bhd in Kuala Lumpur.

'There are still issues with recent currency weakness' that are deterring foreign buyers, he said.

Malaysian government bonds handed investors a loss of 0.1 per cent this month, after gaining 0.8 per cent in July, according to an index compiled by HSBC Holdings Plc.

The ringgit on Tuesday touched the lowest since December after an eight- day slide, its longest losing streak since a peg to the dollar was scrapped in July 2005.



Investors submitted bids for 1.59 times the amount of debt on offer, according to the central bank, which conducts auctions on behalf of the treasury.

The average so-called bid-cover ratio was 1.94 times in 10 previous auctions of various maturities this year. - Bloomberg