KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
Despite President Donald Trump’s repeated calls for rate cuts, the forces shaping long-term borrowing costs go far beyond the influence of Federal Reserve Chair Jerome Powell. Structural shifts in global savings and investment demand are pushing yields higher, making a return to the ultra-low rates of the past three decades increasingly unlikely.
Debt Surge Meets Shrinking Savings Pool
Governments and corporations are taking on record levels of debt to finance tax cuts, AI investments, and rising defense budgets. At the same time, the global savings glut that once kept rates low is reversing:
Baby Boomers are retiring, drawing down savings instead of adding to them.
China has scaled back Treasury purchases as it decouples from the US.
Petrostates are redirecting oil revenue into domestic mega-projects rather than US debt.
Bloomberg Economics estimates the natural rate of interest has already climbed from 1.7% in 2012 to around 2.5% in 2024, with a trajectory toward 2.8% by 2030, keeping the 10-year Treasury yield anchored around 4.5%–5%.
Fed Independence Under Pressure
Trump’s criticism of Powell and threats to fire him risk undermining Fed credibility. While a loyalist Fed chair could deliver short-term rate cuts, erosion of central bank independence may spook global investors, driving long-term borrowing costs higher as capital exits US markets.
A New Rate Regime
For decades, falling rates enabled cheap US debt financing, fueling housing booms and equity rallies. That era has ended:
US debt is now near 100% of GDP.
Interest payments are set to exceed defense spending.
Mortgage rates above 7% are weighing on housing valuations.
Even with a potential September Fed cut amid labor market softness, the natural rate trend is firmly upward, and the risk of 10-year yields spiking to 6% or higher cannot be ruled out if fiscal expansion, AI-driven capex, and geopolitical tensions converge.
Investor Takeaway
For bond investors, the shift signals a structural bear market in Treasuries relative to the low-rate era. For equities, higher discount rates underscore the need to focus on companies with pricing power and strong cash flow generation. For policymakers, the message is clear: firing Powell won’t change the fundamentals driving global borrowing costs higher.
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