MGS vs US Treasury yields: does the 10-year gap explain the ringgit?

A common explanation for a weak currency is that its interest rates are lower than America’s, so money leaves. Malaysia has offered a clean test since mid-2023: its 10-year yield has been below the US 10-year every month, and the ringgit has mostly strengthened.

How far is the MGS 10-year below the US 10-year?

At end-August 2026 the gap was −88 basis points. Both figures are month-end values: Malaysia from BNM’s Table 2.5, the United States from FRED DGS10.

10-year MGS yield minus US 10-year Treasury yield, end-August 2026 (3.867% − 4.75%)

Month-end	MGS 10-year	US 10-year	Gap
August 2026 (BNM)	3.867%	4.75%	−88 bp
September 2026 (ADB, data: Bloomberg; supplementary)	4.048%	5.29%	about −124 bp

The September US figure reflects the rise after the Federal Reserve’s increase on 16 September. Malaysian yields also rose in September, but less.

When was Malaysia below the US, and when above?

Period	Month-ends	Gap range	USD/MYR monthly average range
January-October 2007	10, all negative	−149 to −77 bp	3.38-3.51
November 2007-June 2023	188, two negative (January and May 2008)	−4 to +266 bp	2.99-4.70
July 2023-August 2026	38, all negative	−104 to −10 bp	3.91-4.77

For most of the past 20 years Malaysian 10-year yields were above US yields. The widest positive gap, +266 bp in March 2020, came when US yields collapsed in the pandemic. The current negative run is the longest in the series.

Does the gap move with the ringgit?

Only weakly, and not in the way the simple story suggests. The exchange rate here is ringgit per US dollar (monthly average of BNM 12:00 middle rates, via OpenDOSM), so a higher number means a weaker ringgit.

Visual guide

Does the gap move with the ringgit?

Value

• Correlation of gap and USD/MYR level, 2007-2026−0.14
• Same, since 2016−0.38
• Correlation of 12-month changes0.02
• Average USD/MYR when the gap was negative4.1481
• Average USD/MYR when the gap was zero or positive3.7534

-0.384.1481

Measure	Value
Correlation of gap and USD/MYR level, 2007-2026	−0.14
Same, since 2016	−0.38
Correlation of 12-month changes	0.02
Average USD/MYR when the gap was negative	4.1481
Average USD/MYR when the gap was zero or positive	3.7534

The last two rows look like strong evidence that a negative gap means a weaker ringgit, but they mix eras. Most negative months fall in 2023-2026, when the ringgit was weaker for many reasons, while the 2007 negative months had the ringgit near 3.4-3.5. When you compare changes instead of levels, the link almost disappears.

The 2026 path

Month	Gap	USD/MYR
December 2025	−67 bp	4.0919
January 2026	−76 bp	4.0283
February 2026	−47 bp	3.9146
March 2026	−66 bp	3.9515
April 2026	−84 bp	3.9784
May 2026	−86 bp	3.9526
June 2026	−83 bp	4.0778
July 2026	−104 bp	4.0825
August 2026	−88 bp	4.0687

In 2026 the two did move together for a while: the narrowest gap (−47 bp, February) came with the strongest ringgit of the run (3.9146), and the widest gap (−104 bp, July) with a weaker ringgit (4.0825). But between those months the ringgit moved only about 4%, and the August ringgit was still stronger than at any point in 2024.

When could the gap matter more for the ringgit?

Yield differences are one force among several. For Malaysia, three others are large right now.

• Trade. Electrical and electronics exports rose 66.5% year on year in August 2026 and made up 48.4% of total exports (DOSM). Export earnings that are converted into ringgit support the currency regardless of bond yields.
• Risk appetite. In the global sell-off of August 2024 the ringgit strengthened against the dollar, from a July average of 4.6796 to an August average of 4.4174, even as Bursa Malaysia fell.
• The US dollar itself. When US yields rise because of US inflation and Fed action, many currencies weaken together; the gap widens without anything changing in Malaysia.

The gap is more likely to matter when these other forces are quiet, or when it widens quickly. The September 2026 reading of about −124 bp is worth watching for that reason. The related note on trade surpluses and currency flows covers the trade side.

See what a past ringgit amount is worth today →