The 7-year MGS (MGS Sep’24) reopening auction received with firm demand. Excluding RM1.0 billion private placement, the RM3 billion public tender saw bid-to-cover of 2.877 times at average yield 3.919%. This was near the lowe

7-year MGS auction

• The 7-year MGS (MGS Sep’24) reopening auction received with firm demand. Excluding RM1.0 billion private placement, the RM3 billion public tender saw bid-to-cover of 2.877 times at average yield 3.919%. This was near the lower range of WI quotes between 3.92-3.96%.
• In our opinion, demand was driven by bargain-hunting interest as MYR bond yields rose post Raya holidays, tracking the weakened UST amid increased hawkish remarks by global central bank officials. Total outstanding amount along MGS Sep’24 rises to RM8.0 billion after the latest auction, while year-to-date issuances of MGS+GII has climbed to RM62 billion, in contrast to our full-year forecast RM107 billion.
• Meantime, the 5x7 spread is now near the median year-to-date spread of 24bps, but the 7x10 spread remains tight at 3bps, against mean spread of 10bps on year-to-date basis. We think that the 7-year MGS appears to be fairly priced at 3.919%, but cautious on the 10-year MGS at this juncture. Elsewhere, we expect overall market to move sideways with weakening bias amid cautious stance due to renewed rate hike speculations awaiting MPC meeting slated for 13 Jul. Nevertheless, the 7-year MGS should see decent support amid a lack of fresh supply on the shorter dated papers in the near term (next will be new 3-year MGS scheduled in mid-Aug).