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How to buy bonds?

Malaysia’s Government
Corporate Debt Securities
Bond Market
Malaysia’s Government Bond
Market

Government Self-
Debt After Issue
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Securities at and at
Options
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D e I s s
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Choosing Type of Securities to Buy
 Bank Negara Monetary Notes (BNMN)
Issued by Bank Negara Malaysia for managing liquidity in both the conventional
and Islamic financial market.
 Malaysian Treasury Bills (MTB)
Unsecured Bills issued by Government on a discount basis.
 Malaysian Government Securities (MGS)
Unsecured securities issued by Government that requires minimum 10% bid in
multiple of MYR.
 Government Investment Issues (GII)
Unsecured Islamic bonds issued by Government based on Islamic principles
( Bai’ Al-Inah)
 Sukuk Bank Negara Malaysia Issue (SBNMI)
Zero coupon bonds that need a special purpose vehicle to facilitate primary
issuance.
Check the Conditions
 Check Tender Dates

Bank Negara Malaysia will invite tenders before the issue date through
Fully Automated System for Tendering (FAST). Auction details are
normally announced 2 weeks prior to auction date. All relevant
information is posted on FAST.

 Submission of Bids

All government debt securities are offered to Principal Dealers (PDs)


via competitive auction. PDs are invited submit bids directly to FAST.
Procedures
 Interested investors place orders for Government securities through Bank Negara
Malaysia-appointed Principal Dealers (PDs), who charge varying fees for their
services. PDs normally require investors to maintain a cash account and a securities
account for settlement of bond trades. Bids submitted must be in amounts that are
multiples of MYR1 million.

 For further information, investors may contact the PDs listed below:
 AmMerchant Bank Berhad
 Bumiputra-Commerce Bank Berhad
 Citibank Berhad
 Commerce International Merchant Bankers Berhad
 Hong Leong Bank Berhad
 HSBC Bank Malaysia Berhad
 Malayan Banking Berhad
 Public Bank Berhad
 RHB Bank Berhad
 Standard Chartered Bank Malaysia Berhad
Results
 Award Mechanism/Confirmation

For competitive bidding, tenders are sorted in order of yield (lowest


to highest) or price/100 (highest to lowest) and amount of bid. This
order
is used to allot securities to bidders until the issue is fully subscribed.
 Settlement

Tender results are interfaced with Malaysia’s Real-time Electronic


Transfer of Funds and Securities (RENTAS) for securities allotment
and funds transfer. On the issue date, Principal Dealers' securities
accounts are credited with the new bonds, while their cash accounts
are debited for the price of the securities purchased. Principal Dealers
have various procedures for settlement with clients. Normally, they
debit
a client's deposit account while crediting the client’s securities account.
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Af a t u r i t y
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Buying and selling on the secondary
market
 An investor can either hold a security until maturity or sell prior to maturity at
the current market price. Investors can also buy bonds already issued.
Government securities are traded over-the-counter (OTC) in the secondary
market. Investors trade through bond dealers. Bond dealers are financial
institutions licensed by the Securities Commission to trade bonds for their own
or client accounts.
Investors place orders with dealers at the price and amount they want. Different
types of orders can be placed. Order fulfillment depends on whether the order
can find a buyer or seller on the OTC market. The standard market lot for
government securities is MYR 5 million.
Banks maintaining their own bond inventory usually provide their market bid or
offer price to clients. Quotes are price/100 or yield to maturity of the bond.
Payment of Interest and
Redemption
 Payment of Interest

Bondholders receive interest through their cash accounts with Authorized


Depository Institutions (ADIs). On interest payment dates, the paying agent
uses the Real-time Electronic Transfer of Funds and Securities (RENTAS)
system to credit the ADI of the security holder. The ADI then credits the cash
account of the securities holder.
There is no ex-date trading under the RENTAS system. Interest payments are
done at the end of T+1 (one day following the transaction due date). Calculation
of interest, accrued interest, and redemption proceeds are available in Part IV of
the Rules on the Scripless Securities under the RENTAS System, published by
Bank Negara Malaysia.

Redemption

RENTAS handles the redemption process on the redemption date by debiting


and crediting the securities and cash accounts of the ADI of the security holder.
The ADI then credits the cash account of the securities client.
Reopening Issues

 To increase liquidity, existing government issues are reopened. Reopenings


are the offering of new securities with the same terms and conditions as an
existing issue. They are used to increase the size of an outstanding issue. A
reopened bond has the same maturity date, security identifier, and coupon rate
as the original security. The only difference is that they have a different issue
date and usually, a different purchase price based on current market yields.
Self-Service Options

Investor Contact
Bond Calculator Brochures & forms
Center
Bond Calculator
Basic bond calculators illustrate the various relationships between price, yield, coupon
rates, and maturity dates, utilizing the mathematical pricing conventions common in the
market.

Users can input the details of a security, such as yield, coupon and maturity to derive
market price or they can input market price, coupon, and maturity date to derive yields.

Brochures & Forms


For government Debt Securities, there are no online forms investors can use to directly
buy government bonds. For primary issues, forms, and other requirements, the Fully
Automated System for Tendering ( FAST ) is used. The Malaysian Investor, a Securities
Commission of Malaysia site for retail investors, provides helpful guidelines for
investing in Malaysian capital markets and in bonds specifically.

Investor Contact Centers


Bank Negara Malaysia (BNM)
BNM Ringgit Bond Market
Corporate Debt Securities

Corporate Debt After Issues Self-Service


Securities at and Maturity Options
Issues
Choosing the Corporate
Securities You Want to Buy
 Cagamas Instruments
issues by Cagamas Berhad and the instrument include Cagamas Notes,
Cagamas Bonds, Sanadat Mudrabahah Cagamas and Sanadat Cagamas.
 Commercial Papers
issues by Malaysia Corporation and the instrument include Conventional
Commercial Papers and Islamic Commercial Papers.
 Medium Term Notes
issues by Malaysia Corporation and the instrument include Conventional
Medium Term Notes and Islamic Medium Term Notes.
 Private Corporate Bonds
issues by Malaysia Corporation and the instrument include Conventional
Private Debt Securities and Islamic Private Debt Securities.
 Khazanah Bonds
issues by Khazanah National Berhad, a Government holdings company, issues
these unsecured zero coupon bonds under the Islamic principle of Murabahah
and the instrument is Khazanah Bonds.
Check the Conditions
 Check Tender Dates of Notes/Bonds
Cagamas bond auction details are usually announced at least one week prior
to auction by Cagamas Berhad. Forthcoming tenders for the other forms of
corporate and Islamic bonds are posted at least three business days before
the tender date.

 Check Corporate Bond Ratings


Local private debt securities, asset-backed securities, and Islamic debt
securities must be rated by either the Rating Agency Malaysia (RAM) or the
Malaysian Rating Corporation (MARC).

 Determine which Type of Bid to Submit


Cagamas bonds are issued by tender, with Principal Dealers (PDs) required
to participate via competitive auction. Allotment is decided by highest bid.
Cagamas bonds are quoted on an annual yield basis. Investors apply to
dealers to bid on their behalf.
All types of corporate securities are issued by auction or through private
placement. Investors interested in buying new bond issues should contact
designated bond dealers for details on subscription procedures.
Application Procedure
 Investors wishing to buy Cagamas Instruments place bond orders through
appointed Principal Dealers (PDs), which charge various fees for their
services. PDs normally require investors to maintain a cash account and a
securities account for settlement of bond trades. Investors may contact The
Primary Dealers for Cagamas Debt Securities.

 For Commercial Papers, Medium Term Notes, and other corporate bonds,
investors may approach primary subscribers who will later apply fees for
underwriting services.
Results
 Award Mechanism/Confirmation

FAST generates general results accessible to the public, and individual


results for bidders. Allotments go initially to the PD accounts.
PDs then distribute client bids and advise customers of bid results. General
tender results are published by FAST and Bank Negara Malaysia (BNM).
Tender results for Islamic bonds are also published by BNM.

 Settlement

Principal Dealers or approved dealers have various procedures for settlement


with clients. Normally, they debit a client’s deposit account while crediting
the client’s securities account.
After Issue and At Maturity

Buying and Selling on Payment of Interest and


the Secondary Market Redemption
 Buying and Selling on the Secondary Market

An investor can either hold a security until maturity or sell prior to maturity at the
current market price. Investors can also buy bonds already issued.
The corporate bond market in Malaysia is largely over-the-counter (OTC). Buying
and selling conventional and Islamic bonds is done by telephone or other
electronic means between bond dealers and investors.

 Payment of Interest and Redemption

Bondholders receive interest through their cash accounts with Authorized


Depository Institutions (ADIs). On interest payment dates, the paying agent uses
the Real-time Electronic Transfer of Funds and Securities (RENTAS) system to
credit the ADI, which then credits the cash account of the securities holder.

On the redemption date, RENTAS handles debits and credits the securities and
cash accounts of the ADI of the security holder. The ADI then credits the cash
account of the securities client.
Self-Service Options

Investor Contact
Bond Calculator Research Center
Center
 Bond Calculator
Basic bond calculators illustrate the various relationships between price, yield,
coupon rates, and maturity dates, utilizing the mathematical pricing conventions
common in the market.
Users can input the details of a security, such as yield, coupon and maturity to
derive market price or they can input market price, coupon, and maturity date to
derive yields.

 Research Center
AsianBondsOnline is a one-stop clearing house of information on sovereign and
corporate bonds. It contains essential data on current market activities, the legal
and regulatory framework, and government policies and initiatives affecting the
market.
Investors may also refer to FAST and the Ringgit Bond Market websites of BNM.
Bond Pricing Agencies (BPA) in Malaysia provides daily fair value prices of all
MYR-denominated bonds traded in the OTC market. Investors may refer to
Bondweb.com, the first appointed BPA in Malaysia.

 Investor Contact Center


 Bursa Malaysia Marketing Communications Commerce International
Bhd
 Bank Negara Malaysia ABN AMRO
 RHB Sakura Merchant Bankers Berhad AmMerchant Bank Bhd