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.
- 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.
