AmBank Research expects the number of auctions in 2024 to be flat at 37.
PETALING JAYA: Malaysia’s government bond issuance would be “slightly less heavy” next year, according to AmBank Research.
Following the release of the 2024 auction calendar, AmBank Research said that about RM170bil to RM180bil worth of Malaysian Government Securities (MGS) and Government Investment Issues (GII) will be issued next year.
In comparison, the total MGS and GII gross issuance in 2023 was RM185bil.
According to AmBank Research, the lower anticipated 2024 gross issuances takes into account the RM85.4bil fiscal deficit financing target set by the government for the coming year.
Apart from new issuances, there will be a RM93bil refinancing of MGS, GII and Sukuk Perumahan Kerajaan (SPK) maturities.
Net issuance of MGS and GII in 2024 will be RM90.9bil. AmBank Research said the amount has yet to include the refinancing of bills
In 2023, net issuance of MGS and GII is estimated up to RM107.7bil, comprising a fiscal deficit financing of RM93.2bil plus SPK maturity of RM3.6bil, and refinancing of government bills of about RM11bil.
“The number of auctions in 2024 will be 37 versus a similar 37 in 2023.
“This will translate into an auction average range of RM4.6bil to RM4.9bil and would be a minor reduction from the RM5bil average in 2023.
“Thus, per auction demand should remain firm, versus the average bid-to-cover in 2023 of 2.16 times.
“This is assuming a sustained increase in MGS and GII holdings by large investors in the coming year (pension fund institutions, banks and offshore funds),” AmBank Research stated in a note.
The research house also expects the issuance of GII to surpass MGS next year, both in number and value.
Of the total number of auctions in 2024, 18 are for MGS while 19 are GII auctions.
In 2023, MGS auctions were similarly numbered 18 while GII was 19.
“By tenor, we could also see semblance of the auctions done in 2023 – we expect issuance distribution to remain highest for five-year to 10-year tenors.
“However, we’ve also noted that there was a preference from the government to issue more GIIs with longer maturities of 20-year to 30-year last year, and the coming year may also see some similarity.
“In any case, the focus on issuances in 2024 towards five-year to 10-year and longer maturities GII may slightly nudge the outstanding MGS and GII maturity profile to slightly longer maturities,” it said.
Average maturity of MGS and GII was 9.7 years in 2023.
On private placements, AmBank Research expects them to remain an option for auctions in the coming year, especially as total offerings will remain relatively elevated compared to the pre-pandemic period of below RM120bil.
In 2023, there were 14 private placements, for tenors of 15-year to 30-year, totalling RM30bil.
“Private placement amount was 16.2% of total issuance in 2023, at a time when total issuances had surged.
“The 2024 auction calendar has not specified any private placements as yet,” it said.
