Malaysia’s five-year government bonds slumped for a sixth week on concern that the government will increase debt sales to fund a widening budget deficit as economic growth slows. The ringgit weakened. Yields rose to the highest level since Nov. 24 before the government unveils a second fiscal stimulus package on March 10 as the nation heads for its first recession since 1998. The finance ministry will sell 4.5 billion ringgit ($1.2 billion) of 2014 notes March 12, the single biggest offering since June 2004. “There’s concern that the government will bump up its spending, hence bond supply risk has increased,” said Irwaan Iskandar Abrahim, who helps manage about $134 million at ASM Investment Services Bhd. in Kuala Lumpur. “We are not buying long bonds.” The yield on the 5.094 percent note due in April 2014 increased 26 basis points this week to 3.60 percent as of 5 p.m. in Kuala Lumpur, according to Bursa Malaysia Bhd. The price fell 1.323, or 13.23 ringgit per 1,000 ringgit face amount, to 106.927. Yield rose this week by the most since the five days ended Feb. 13. A basis point is 0.01 percentage point. Next week’s auction will raise total proceeds from local debt sales in 2009 to 20 billion ringgit, making it the busiest start to a year since at least 1999. It sold a record 60 billion ringgit of bonds in 2008. Malaysia’s economy expanded 0.1 percent last quarter, the slowest pace since 2001. The government’s budget deficit will widen from a five-year high of 4.8 percent of gross domestic product, Deputy Prime Minister Najib Razak forecast last month. Ringgit Weakens Malaysia’s ringgit weakened for a fourth straight week and traded near a three-year low after a government report today showed exports slumped in January by the most since December 1993. The ringgit traded at 3.7165 per dollar in Kuala Lumpur, a 0.3 percent loss from a week ago, according to data compiled by Bloomberg. The currency reached 3.7390, the lowest level since February 2006. It gained 0.3 percent today. “The ringgit is not just a reflection of the economic slowdown but also a function of capital flows,” said Danny Wong, chief executive officer at Kuala Lumpur-based Areca Capital Sdn., which manages about $80.5 million. “People are withdrawing money from emerging markets, not just from Malaysia.” Overseas shipments plunged 27.8 percent to 38.3 billion ringgit in January from a year earlier, the trade ministry said in a statement in Kuala Lumpur. Economists in a Bloomberg News survey expected a 22.4 percent drop. Tolerate Decline Bank Negara Malaysia may tolerate declines in the ringgit should it depreciate in tandem with regional currencies, Wong said. Seven of Asia’s 10 most-traded currencies excluding the yen fell against the greenback this week, led by India’s rupee, which slipped 1.4 percent. The Kuala Lumpur Composite Index of stocks declined 3.6 percent this week, the most since October. Foreign investors cut their holdings of ringgit-denominated debt to 47.6 billion ringgit in December, from a peak of 126.5 billion ringgit in April 2008, according to data published by the central bank.

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