KUALA LUMPUR, Dec 4 (Bernama) -- Bursa Malaysia rallied to close broadly higher on Wednesday amid strong buying interests mainly in utility and technology stocks, with the benchmark index gaining 0.44 per cent. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 7.13 points to 1,614.09 from Tuesday’s close of 1,606.96. The index opened marginally higher at 1,606.97 and moved between 1,606.53 and 1,616.03 throughout the day. Advancers thumped decliners 727 to 381 on the broader market, with 522 counters unchanged, 781 untraded and 10 suspended. Turnover advanced to 3.60 billion units valued at RM3.30 billion versus 3.32 billion units valued at RM3.30 billion on Tuesday.
China's 10-year bond yield dropped below 2% on Monday, reaching a historic low of 1.9750%, as investors flocked to the safety of bonds amid a weakening economy and expectations of further rate cuts. This marks the lowest level recorded since 2002.
Key Drivers of the Bond Rally
- Economic Weakness:China's struggling economy and ongoing property sector challenges have pushed investors toward safer assets like bonds.
- Policy Measures:A recent ban on preferential deposit rates reinforces expectations of continued low interest rates.
- The People’s Bank of China (PBOC) is aligning deposit rates with the seven-day reverse repo rate, currently at 1.5%.
- Rate Cut Expectations:Analysts at Morgan Stanley predict the PBOC will cut policy rates by 40 bps by Q1 2025, further supporting the bond market.
Market Highlights
- 10-Year Treasury Futures: Jumped 0.4%, reaching a record high.
- 30-Year Treasury Yield: Fell by 4 bps to 2.16%.
- Deposit Rates: One-year AAA-rated negotiable certificates of deposit (NCDs) fell by 10 bps to below 1.7%.
Why the Rally Persists
- Weak Fundamentals: "Policies aim to prevent a hard landing, not to drive strong growth," said Ke Zong, a former hedge fund manager.
- Institutional Demand: Under-allocated funds and insurance companies are driving pre-year-end allocations.
Comparing Global Yields
- Chinese 10-year bonds now yield 222 bps less than US 10-year bonds, marking the widest gap since the early 2000s.
- Historically, China’s bonds yielded higher than US bonds, but the reversal occurred in 2022 due to divergent post-pandemic economic recoveries.
Outlook for 2025
- Yields Expected to Fall Further: Analysts like Chen Jianheng foresee yields dropping to 1.7%-1.9% next year, supported by loose monetary policy and lower interbank deposit rates.
- Bond Bulls Supported: More than 1 trillion yuan of refinancing bonds were issued in November, and the PBOC injected 800 billion yuan via reverse repos last Friday.
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