Malaysian Bond Market

Malaysian Bond Market

Bond Issuers

Government Bond

Conventional Bond

• Bond that issued by Government
• Purpose : to support government spending (often issued in country domestic currency)
• Divide into 2 issuer (Debt Obligation)
• Federal Bond
• Municipal Bond

Federal Bond

• issued by federal government
• the interest earned is generally exempt from any state and local taxes.

History of Malaysian Bond Market

Municipal Bond

• issued by state government
• the interest earned is free from federal taxes and generally any associated taxes from the region where the bond was issued.

• Long-term debt agreement
• an investor borrows money to an entity (corporate or government)
• requires the entity to repay the borrowed money with specified amount of interest on the maturity date.
• The issuer creates this debt instrument which they assure the payment of principal and interests.

Islamic Bond

• Also knows as SUKUK
• Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia, Islamic religious law
• may be issued for existing assets or for assets that will exist in the future.
• rewarded with a share of the profits derived from the asset
• sukuk holders share the risk of the underlying asset. If the project or business on which sukuk are issued doesn’t perform as well as expected, the sukuk investor must bear a share of the loss.

NATASYA AMIRA ERINOFIALDI 236215

NURHASHIMAH MOHD ROSLAN 236383

NURSYAZWANI DONYA 236442

ANIS AFIQAH SURJANA 236465

NURLINA DARNIS 236495

Relationship between Price and Yield

Malayan Banking Berhad

Government of Malaysia (MGS)

• Lead Arranger by Maybank Investment Bank Berhad
• The Issue amount of the bond is RM 1,100,000,000.00
• Maturity date is 25 September 2008 - 25 September 2068 (60 years)
• The coupon type is at Fixed Rate
• Coupon rate is at 6.30%
• The instrument of the bond is Corporate bonds (conventional)
• Current rating : AA (Debt has a very strong capacity to pay interest and repay principal)

• Lead Arranger by Bank Negara Malaysia
• Issuer amount of the bond is RM 11,000,000,000.00
• maturity date is 28 September 2012 - 31 March 2020 (7 years)
• Type of coupon is at Fixed Rate
• Coupon rate is at 3.49%
• instrument of the bond is Malaysian Government Securities
• There is no current rating of the bond

When the price increase, the yield will be decrease

Negative relationship

Khazanah Nasional Berhad

Lead Arranger: KHAZANAH NASIONAL BERHAD

Issue Amount: RM 1,300,000,000.00

Maturity Date: 24/02/2014 - 24/02/2021 (7Years)

Coupon Type: Zero coupon

Coupon Rate: zero

Instrument: Corporate bonds (ISLAMIC)

Current Rating : MARC *-

: RAM –

* Malaysian Rating Corporation Berhad

DIFFERENCES BETWEEN CONVENTIONAL AND ISLAMIC BONDS

Conventional Bond

Islamic Bond

• Pure debt unpaid from the issuer.
• Loan of money (earing money from money).
• Can be issued for any purpose.
• BH not concerned about the expenses.
• Depends of creditworthiness of the issuer.
• Sale of debt.

• Ownership in an asset.

• A permissible Contract.

• Asset is islamically permissible.
• Asset’s expenses attached to SH.
• Sukuk price related to the market value of the sukuk price.
• Sale of share of an asset.

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