Malaysia Bond Risk May Fall to Widen Gap to Indonesia, ING Says

There’s room for five-year Malaysian credit-default Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term to fall by a further 10 basis points to bring them to a fair range of 100 to 150 basis points, according to ING Groep NV.

The Dutch-based lender pegs Indonesian swaps at 150 to 200, and sees the current gap between the two countries’ default risk as 10 basis points too tight, Singapore-based economist Prakash Sakpal wrote in a research note Tuesday.

The cost of insuring Malaysian and Indonesian bonds against default has fallen as concern eased over the health of the global economy after central banks showed a willingness to support growth, helping stabilize crude oil prices. Malaysian default swaps have declined 86 basis points to 161, since reaching a six-year high in September, according to data from CMA. Indonesian contracts dropped 77 basis points to 203, descending from the highest in two years.

Bank Negara Malaysia is likely to keep the overnight policy rate at 3.25 percent this year because it probably views risks as evenly balanced between growth and inflation, Sakpal wrote. ING sees Malaysia’s 10-year government bond Yield Yield A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a Read this Term at 4 percent by end-2016, according to the report, compared with 3.84 percent on Tuesday.

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net. To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net, Shikhar Balwani

By: Liau Y-Sing

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