KUALA LUMPUR: Maybank Investment Bank Bhd (Maybank IB) expects a record-breaking RM81 billion issuance of 15 to 30-year bonds in 2025, marking an increase of RM6 billion compared to RM75 billion in 2024.
Maybank IB said the ultra-long sector is expected to account for nearly half, or an unprecedented 49 per cent, of total gross Malaysian Government Securities (MGS) and Government Investment Issues (GII) supply, compared to the five-year average of 40 per cent.
The shift could also extend the weighted average maturity to 14 years, up from 13 years.
"Despite a step-up in long duration supply, we think the overall supply/demand profile at the long-end remains manageable, because: First, the total dollar value of one basis point supply should be little changed year-on-year due to lower total MGS+GII issuances.
"Second, the increase in ultra-long bonds is not significant after accounting for private placements (PP)," the bank added.
Assuming the PP take-up rate remains at 40 per cent - equivalent to RM1.8 billion for an estimated average issuance size of RM4.5 billion - the bank expects a net YoY increase of RM3.6 billion in ultra-long bond supply.
The increase should be manageable for the market.
"Third, the design of the auction calendar is typically a result of consultation, potentially reflecting higher demand for durations.
"Overall, we do not expect this to cause significant pressures on the long-end although some steepening is possible if US Treasury weakness persists and currently the 10-year and 20-year and 10-year and 30-year curves are slightly flat versus their 1-year means," it added.
Maybank IB said Bank Negara Malaysia has released the 2025 auction calendar, which maintains the same total of 36 auctions as in 2024.
"Average issuance size is expected to be smaller at RM4.56 billion, as we forecast lower gross MGS+GII supply of RM164 billion," it said.
It added that issuances are expected to be fairly evenly distributed across the first half of 2025 and second half of 2025 totalling RM82.5 billion and RM81.5 billion respectively.
"But net supply is heavier in the first half with about 82 per cent of total as maturities are back-loaded in Aug-Oct.
"On a quarterly basis, we estimate net MGS+GII supply of RM 28.3 billion, RM37.5 billion, RM7.7 billion and RM7 billion from the first quarter of 2025 to the fourth quarter of 2025," it added.