Instruments, Investor Base, and Recent Developments in the Malaysian Government Bond Market

34 Pages Posted: 23 May 2018

See all articles by Yinqiu Lu

Yinqiu Lu

International Monetary Fund

Dmitry Yakovlev

Bloomberg L.P.

Date Written: April 2018

Abstract

Foreign holdings of Malaysian local currency (LCY) government bonds have increased since the global financial crisis. By exploring the micro-level bank by bank and fund by fund data, we are able to shed light on the key features of the LCY government bonds including their investor base. The data suggest that to gain exposure to the Malaysian credit, holding cash bonds is generally only one part of the strategy of foreign investors and in many cases FX derivatives are involved. The availability of an efficient FX derivatives market could help to attract a wider range of foreign investors and enrich the bond market. Meanwhile, the analysis of the risk related to the foreign ownership ideally could also cover the role of derivatives. The analysis also allows us to conclude that despite the importance of foreign investors, domestic participants, as the core investor base, could help to ensure the stability and proper functioning of the bond market.

Keywords: Asia and Pacific, International financial markets, Malaysia, local currency government bonds; FX derivatives; Malaysia, local currency government bonds, FX derivatives, Financial Markets and the Macroeconomy, General

JEL Classification: E43, E44, F30, G15

Suggested Citation

Lu, Yinqiu and Yakovlev, Dmitry, Instruments, Investor Base, and Recent Developments in the Malaysian Government Bond Market (April 2018). IMF Working Paper No. 18/95, Available at SSRN: https://ssrn.com/abstract=3183305

Yinqiu Lu (Contact Author)

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dmitry Yakovlev

Bloomberg L.P. ( email )

731 Lexington Avenue
New York, NY 10022
United States

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