Bond / Sukuk: What is it? - - Financial Market Media No. 1 in the World Bond / Sukuk: What is it? Bond / Sukuk: What is it?

July 14, 2021

Bond / Sukuk: What is it?

 What is Bon?

  • It is debt - when an investor lends to a company or government. So, bond investors are paid interest on the loan.
  • Think about this - you borrow from a bank. So, the bank paid interest.
  • Bonds have a rating, for example AAA - it indicates a company’s financial ability to pay investors.
  • Shariah -compliant bonds are called Sukuk. Sukuk make up the bulk of the Malaysian bond market.
  • As of 31 May 2021, the size of the Malaysian bond market is RM1.68 trillion - BNM Bond Info Hub.
Why do companies issue bonds / sukuk?

  • Companies issue bonds / sukuk to raise money to finance new projects, finance operations and grow businesses.
  • It is also an alternative way for companies to raise money other than getting a bank loan or issuing new shares.

Why does the government issue bonds / sukuk?

  • The government issues bonds / sukuk to raise money for national development expenditure and government working capital.
  • Malaysian Government Securities (MGS) and Government Investment Issues (GIIs), which are long -term bonds, are issued by the Malaysian government to raise money for development expenditure.
  • The Malaysian Treasury Bill (MTB) and the Malaysian Islamic Treasury Bill (MITB) are short -term bonds issued to meet the government's working capital requirements.