Regulated Short-selling of Bonds: A Positive Step, Nascent Stage

Dear all,

Regulated Short-selling of Bonds: A Positive Step, Nascent Stage

·         Regulated short-selling of government bonds will liberalised by widening the access to all domestic investors. This aims to boost liquidity and facilitate effective hedging of interest rate risks.

·         The most significant step announced yesterday, however, is the relaxation onshore hedging by allowing registered non-bank entities fully and actively hedging their FX exposures. This is a big step up from a dynamic hedge ratio of 25% previously.

·         Market reacted positively with MGS yields down about 3-6bps and USDMYR down about 200pips since the announcement.