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.
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BUSINESS & MONEY
