Rising Bond Yields Pressure Bank Portfolios in India and Malaysia

Rising government bond yields are creating significant mark-to-market pressure on bank investment portfolios in India and Malaysia, threatening to reduce treasury income across both regions. In India, the benchmark 10-year government bond yield rose approximately 44 basis points in the September quarter to around 7.19%. This shift led analysts at Jefferies Group to estimate a 58% year-on-year decline in aggregate treasury gains to ₹5,500 crore, with public sector banks expected to face the heaviest impact due to their larger government security holdings.

In Malaysia, rising Malaysian Government Securities yields are driving similar volatility, influenced by global repricing and United States Treasury yields reaching levels not seen since 2002. Public Bank Berhad has already experienced a market capitalization drop of RM31 billion, with its stock hitting a nine-month low.

While some analysts suggest that net interest margins may benefit in the medium term, the immediate volatility is shifting investor focus toward businesses with higher earnings visibility and dividend yields. Motilal Oswal Financial Services noted that treasury gains are expected to remain muted during this period of instability.