It said foreign holdings of Malaysian bonds fell by RM576.8 million in June (May: net inflow of RM5.5 billion), led by a selloff of RM2.6 billion of Malaysian Government Securities (MGS).

“The decline in MGS holdings was likely a result of a lack of rollover options, given a large negative net issuance amid lumpy maturities last month (matured: RM21.5 billion; net issuance: RM16.5 billion).

“Foreign buying of Government Investment Issue (GII) continued in June (RM1.4 billion), along with purchases of short-term Malaysian Treasury Bills (MTB) and Malaysian Islamic Treasury Bills (MITB) (RM1.2 billion),” it said in a statement.

The firm said the bond market could “enjoy further attention” in July as a softer-than-expected US inflation print and dovish remarks by the US Fed chair Jerome Powell on July 15 convinced markets that the Fed would cut interest rates in September.

“According to CME FedWatch Tool data, the market-assigned probability of a rate cut in September surged to 97% on July 18, up from about 64% as of the end of June,” it added.

RAM Ratings highlighted that the yields of 10-year US Treasury (UST) securities and MGS dropped by a respective 15 basis points (bps) and 3.2bps month-on-month, reaching 4.36% and 3.88% by the end of June (end-May: 4.51% and 3.91%).

On July 18, the ringgit appreciated to RM4.67 against the US dollar (end-June: RM4.72), while 10-year UST and MGS yields eased further to 4.20% and 3.83%, respectively.