1MDB bonds dipped to its lowest level in past two weeks amid the firm's decision to default on interest payment due to a dispute with Abu Dhabi's International Petroleum Investment Corporation (IPIC).

1MDB must today pay US$52.4 million in interest on the US$1.75 billion of 5.99 percent bonds, maturing in 2022, but is expected to default again.

"The 5.99 percent notes have dropped 1.79 cents on the dollar this month to 100.54 cents, the lowest since April 22, according to prices compiled by Bloomberg," the financial portal reported.

The bond is co-guaranteed by IPIC.

"Why pay the next coupon if the last one wasn't?" Zafar Nazim, a London-based credit analyst at JPMorgan Chase & Co reportedly told Bloomberg.

"Nothing has changed. But we don’t know about discussions in the background between IPIC and 1MDB, so we can't rule out the possibility of a temporary resolution with regard to the coupon payments," he said.

1MDB last month defaulted on US$50 million coupon payment for a separate bond, also guaranteed by IPIC.

IPIC is refusing to make payments, claiming that 1MDB had not paid the agreed fee to guarantee the bond.

1MDB said it paid to a British Virgin Island-registered subsidiary of IPIC, but IPIC denies links to the BVI firm.

Yesterday, Fitch Ratings Agency said the 1MDB default could only affect Malaysia if it undermines ability to cut deficit and keep federal debts in check.

The risk for Malaysia is low despite the fact that a default of the bonds in 2022 could trigger a cross default on 1MDB a government-guaranteed US$5 billion sukuk in 2039, Fitch said.

"Payment under the guarantee would only be required if bondholders vote to require acceleration under the cross-default clause.

"We believe that there is unlikely to be a majority among bondholders for acceleration," it said.