Investor Sentiment and Malaysian Government Bonds: A COVID-19 Case Study

The COVID-19 pandemic has fundamentally altered investment strategies, particularly in bond markets. This study examines the global determinants of Malaysian government bond yields, comparing pre-pandemic and pandemic periods using daily data from January 2017 to May 2021. During the pandemic, Malaysian government bonds exhibited equity-like characteristics, diverging from their traditional safe-haven role, as evidenced by a positive relationship between bond yields and investor sentiment shocks. Gold prices emerged as the most influential factor, with their impact on bond yields becoming more pronounced during the pandemic, reaffirming gold's status as a safe-haven asset. The findings suggest that investors moved assets to gold during heightened risk periods before transitioning back to bonds. This highlights the need for investors to monitor gold prices and for policymakers to enhance bond market stability during crises to mitigate future economic uncertainties.