The government has postponed plans to issue long-dated bonds for up to two years but remains determined to develop a vibrant bond market, a senior minister said yesterday.

"This year may be a bit aggressive. But we hope to achive it in the next 18 to 24 months," Second Finance Minister Nor Mohamed Yakcop said.

He did not elaborate but one economist said the decision would remove "concerns of supply overhang of government papers in the market."

Nor Mohamed had said in April that he hoped the government would issue its first 20-year bond this year, as part of a plan to broaden the country's debt market.

But he said that the government remained committed to develop Malaysia's RM353 billion debt market.

"We want to develop the bond market in terms of size, debt, maturity and liquidity so that there is a vibrant market. We will continue to broaden the market. It is a priority area for us," he said.

Reducing budget deficit

Nor Mohamed last month said Malaysia would issue up to RM25 billion worth of mortgage-backed bonds.

"For the government, securitisation of its housing loans provides a value option to transform its relatively large illiquid assets into liquid and tradable market instruments while, at the same time, achieving a more efficient and lower cost of financing," he said.

Nor Mohamaed said Malaysia still wanted to issue long-dated bonds, adding that "the idea is basically to have the whole range of the yield curve at all sectors ... to have a yield curve going up to 20 to 25 years."

Azrul Azahar, senior economist with MIDF Bhd told AFP that the government's decision to defer the bonds issue may indicate that measures it had taken to contain the budget deficit were bearing fruit.

The government has vowed to reduce its budget deficit, which hit RM17.5 billion last year, by downsizing and cutting development projects.