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Malaysian Bond Market

The Malaysian bond market is one of the largest and most developed in the region. Malaysian bonds are stable, liquid and offer attractive real yields for both conventional and Islamic investors.

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Market Structure

The Malaysian bond market comprises government and corporate debt securities in conventional and Islamic form

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Bond Auctions

Government debt securities are issued in the primary market through competitive auctions

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Non-resident participation

Stable non-resident investors form an important part of the investor base

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Global Bond Indices

Malaysian Government securities are included in a number of global bond indices, providing investors further opportunities to invest via index-tracking funds

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Market Structure

Malaysian Government securities are marketable debt instruments issued by the Government of Malaysia to raise funds from the domestic capital market. The central bank (Bank Negara Malaysia) acts as banker and adviser to the Government and assists in planning and facilitating issuances through market infrastructure that it owns and operates. Currently, the various forms of Government securities in Malaysia are:

  • Malaysian Government Securities (MGS) - long-term interest-bearing debt securities issued by the Government of Malaysia to raise funds from the domestic capital market for development expenditure
  • Malaysian Government Investment Issues (MGII) - long-term Islamic Government securities, issued based on established Shariah principles
  • Malaysian Treasury Bills (MTB) - short-term discount securities issued by the Government of Malaysia for working capital
  • Malaysian Islamic Treasury Bills (MITB) - short-term Islamic Government securities, issued based on established Shariah principles

Besides Malaysian Government securities, local corporates also tap the bond market for financing through issuance of bonds, medium-term notes and commercial papers.

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Bond Auctions

Competitive auctions for Malaysian Government securities are normally opened three business days before and closed one business day before the target issue date. Principal Dealers appointed by the central bank participate directly in these auctions by submitting proprietary bids and bids on behalf of clients.

Key Features of the 2021 Auction Calendar

The 2021 Government Bond Auction Calendar is a testament to the continuous efforts to consolidate the number of government bond issuances in improving liquidity while maintaining balanced issuances across the curve in meeting investors’ demand.

Larger benchmark bond sizes through more re-openings

All MGS auctions will be via re-opening, while there will only be 2 new MGII issuances (2020: 4 new issuances ; 2019: 12 new issuances). This continues to build larger outstanding sizes per issuance, which is expected to improve overall trading liquidity and better facilitate index tracking activity as number of issuances are further consolidated.

Well-spread balanced supply across the curve and issuances are spread out throughout the year

There will be 37 issuances for 2021 (2020:34) in order to ensure that the supply is well distributed throughout the year, taking into consideration market’s ability to absorb the additional supply. Generally, there will be 3 to 4 issuances per month in 2021 with the exception of December (2 issuances) as market winds down towards year end.

Additional issuances to be anchored by shorter term issuances while long end issuances are supported by private placements

Additional 2021 issuances will be financed via short to medium term issuances including the treasury bill issuances (Table 1 for comparison with 2020). Besides, private placements will be allocated to all long-term issuances, providing support to the long end of the curve.

Table 1: Number of issuances by tenor

Tenor (Years) 2020 2021 Changes Private Placement
3 4 5 +1  
5 4 6 +2  
7 6 6 -  
10 6 6 - Yes
15 6 5 -1 Yes
20 4 5 +1 Yes
30 4 4 - Yes
Total +3  
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Non-resident Participation

Non-resident investors in the Malaysian bond market comprise a diverse group of institutional investors, including foreign central banks and governments, asset managers, pension funds and insurance companies. These investors contribute to market efficiency by providing valuable liquidity to the secondary market.

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Global Bond Indices

Due to Malaysia’s investment grade credit rating, progressive and inclusive financial market policies, developed infrastructure and ample secondary market liquidity, Malaysian bonds have been included in various global bond indices:

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