SINGAPORE (April 28): Buying into the sharp slump in Malaysian short-tenor bonds may be a lucrative trade in emerging Asia due to an overpricing of rate hikes. Economists expect Bank Negara Malaysia to start hiking in the second half from the record low policy rate of 1.75%. Its spread over the policy rate widened to a record high of 189 basis points this week. Rate-differential impactEven if Malaysia’s central bank starts with rate hikes in the second half of the year, it will still lag the US Federal Reserve (Fed). The federal funds rate last overtook Malaysia’s policy rate in March 2005, with the positive spread remaining until December 2007.

Source: The Edge Markets April 28, 2022 08:12 UTC