Malaysia saw a record year for new corporate and sukuk issues in 2025, as borrowers took advantage of the tightest spreads for at least two decades.
Corporate bond and sukuk issuers printed a record M$138.4bn (US$34bn) last year, up from M$94.1bn in 2024, according to LSEG data. The country accounted for 34% of total sukuk issues in 2025, according to S&P data.
The surge in corporate bond and sukuk issues last year came on the back of narrowing corporate spreads over benchmark Malaysia government securities.
The 10-year AAA rated yield spread against MGS narrowed to 11.3bp as of end-March 2025 – the tightest spread on record based on rating agency RAM's data stretching back to 2005.
“The past year saw a relatively favourable interest rate environment, as global bond yields fell following the broader US Federal Reserve rate‑cut cycle, while the overnight policy rate cut in July 2025 also helped anchor yields at appealing levels,” said Woon Khai Jhek, senior economist at RAM.
Bank Negara Malaysia cut its overnight policy rate by 25bp to 2.75% in July.
The narrow domestic spreads encouraged companies to tap the bond market, Woon said.
There were 96 new bond programmes set up in 2025 – 48 of which were from first-time issuers.
“Yields were really low, and after the rate cut, we saw yields come off even more and everyone just rushed to issue,” said a bond investor. “The rush in issues pushed yields back up because supply suddenly jumped up.”
The average corporate spread for the year was 23bp, just a tad above 2024’s average of 20bp.
Slower pace
This year's volume is unlikely to top 2025, as the factors that contributed to the record high, like rare issuers making opportunistic forays, are unlikely to recur.
Bond bankers in Malaysia are expecting volume to be flat to 10% lower in 2026, noting that issuers which had financing needs within the near term have already tapped the market.
Credit spreads this year are also unlikely to return to 2025 levels.
“This year ... yields have held there and if it doesn’t go down from here, issuers don’t really have a push to issue,” said the investor.
RAM estimates gross issuance volume from corporates will be about 20%–25% lower. Supply will be supported by steady refinancing needs, still-accommodative interest rates and the rollout of national infrastructure and utility initiatives.
The ringgit has been a strong performer, gaining 3.7% against the US dollar in the fourth quarter of 2025, helped by Malaysia's strong economy.
“From a growth perspective, Malaysia appears well placed, with foreign investment and resilient domestic consumption underpinning the ringgit,” said Alan Siow, co-head of emerging market corporate debt at investment manager Ninety One, in a note on January 14.