There was relatively weak demand seen for the 10-year MGS (MGS Nov’27) reopening auction. Apart from RM1 billion private placement, the RM3 billion public tender registered bid-to-cover ratio of 1.683 times, alongside average yield of 3.978%, within the range of WI 3.96-3.99% traded prior the tender close.

10-year MGS auction

• There was relatively weak demand seen for the 10-year MGS (MGS Nov’27) reopening auction. Apart from RM1 billion private placement, the RM3 billion public tender registered bid-to-cover ratio of 1.683 times, alongside average yield of 3.978%, within the range of WI 3.96-3.99% traded prior the tender close.
• The 7x10 spread widened to around 6bps, against a mean spread of 4bps, while 10x15 spread was near to the mean spread of 46bps since Jun 2017. In our opinion, the 10-year MGS looks decent at 3.978%, near to our target resistance at 4.00%. The 10-year benchmark yield was traded about 6bps higher since last Friday, as sentiment weighed by weakening UST, driven by rise in oil prices and cautious trading ahead of FOMC. At this juncture, we reckon that buying-on-dips interest may emerge, particularly from the local players. Furthermore, upsides for UST yields are more likely to be capped in the near term period, as recent remarks from central banks turned less hawkish as market perceived, given that inflation remained below their targets.
• Post auction, total outstanding amount of 10-year MGS (MGS Nov’27) increased to RM8 billion. On the supply side, there will be a lack of 10-year benchmark offering until Nov this year (10-year GII), along with another 10-year MGS reopening slated in Dec.