Bank Negara conducted auction for the new 20-year MGS (MGS Apr’37), at RM2.0 billion

20-year MGS auction

• Bank Negara conducted auction for the new 20-year MGS (MGS Apr’37), at RM2.0 billion size (not including RM1.0 billion private placement). The auction saw relatively soft demand with bid-cover ratio of 1.585 times (second lowest this year, lowest at 1.538 times recorded at 5-year MGS auction held in Mar), while average yield was 4.762%, higher than WI 4.75/65% a day prior.
• We think that the 20-year MGS is decently priced at 4.76%, leaving a 63bps 10x20 spread in contrast to the median spread of 53bps since Apr 2016. However, we reckon that the upside for 20-year MGS will be capped, given the anticipation of another long dated 15-year MGS reopening auction slated for later this month.