KUALA LUMPUR: CIMB Securities Sdn Bhd has forecast a pre-emptive 25-basis-point hike in the overnight policy rate (OPR) in March 2027, citing household support measures, cost-push inflation and broader demand-side pressures.
The revised outlook came as the firm noted that the government's RM4 billion reopening of the 20-year Government Investment Issues (GII) auction scheduled for Oct 22 fell short of its RM5 billion expectation.
The research firm said the smaller issuance was "surprising" given the Finance Ministry's latest guidance that Malaysian Government Securities (MGS) and GII issuance would reach RM90 billion and RM95 billion respectively in 2026, implying broadly RM5 billion for each remaining auction.
"Still, smaller year-end supply is not unprecedented. The 10-year auction was downsized to RM3 billion in December 2025, while in 2024 the final three-year auction was cancelled and the 10-year auction reduced to RM2 billion," it said in a note.
The firm said the smaller issuance size could imply considerations such as potential fiscal outperformance.
Alternatively, the firm said the smaller-than-expected auction may reflect a tactical decision amid the wider term premium and heavy duration supply in the fourth quarter.
Additionally, CIMB Securities has revised the overnight policy rate (OPR) outlook to pencil in a pre-emptive 25 basis points hike in March 2027, driven by household support, cost-push inflation and broader demand-side pressures.
Additional household income and support is estimated at RM11.5 billion, supported by wage measures, expanded personal income tax relief and income tax rate reduction for the RM70,000–100,000 income bracket, as well as a RM1 billion increase in cash handouts.
"Despite a challenging global rates backdrop, the 10-year MGS has rallied to 3.86 per cent from 4.17 per cent. The term premium is a tad narrow at the bellies and the funding strategy in 2027 will retain a bias towards medium- and long-dated issuance even as aggregate supply moderates.
"Against this backdrop and more long-tenor auctions to come in the fourth quarter, we expect the 10-year MGS to converge with an end-2026 forecast of 4.0 per cent," it added.
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