KUALA LUMPUR (Oct 22): Yields on short-end Malaysian government bonds are likely to remain stable in the near term, DBS said on Wednesday, following a decline since the start of 2025.

A pre-emptive reduction in the overnight policy rate in July to preserve growth appears to be bearing fruit and Malaysia’s central bank is likely to keep the benchmark interest rate unchanged for the rest of 2025, the Singapore-based bank said in a note.

“We expect short-end Malaysian Government Securities (MGS) yields to remain stable in the near term,” DBS said.

While off lows, the yield on the benchmark three-year MGS is still down nearly 40 basis points year to date driven by recent anxiety over economic growth amid global trade tensions. Bond yields and prices move inversely.

Bank Negara Malaysia (BNM) has stood pat since cutting the policy rate by 25 basis points in July to support economic growth at a time of moderate inflation. Data out on Wednesday showed benign inflation in September while flash estimates released last week showed Malaysia’s economy expanding faster than expected in the third quarter.

“In the absence of a severe and unexpected negative growth shock in the near term, we think BNM will preserve ammunition, opting for a wait-and-see approach,” DBS said.