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Conventional

Bank Negara Monetary Notes (BNMN)

BNMN are securities issued by Bank Negara Malaysia replacing the existing Bank Negara Bills (BNB) for purposes of managing liquidity in the conventional financial market. The maturity of these issuances has been lengthened from one year to three years. New issuances of BNMN may be issued either on a discounted or a coupon-bearing basis depending on investors' demand. Discount-based BNMN will be traded using the same market convention as the existing BNB and Malaysian Treasury Bills (MTB) while the coupon-based BNMN will adopt the market convention of Malaysian Government Securities (MGS).

 

Malaysian Treasury Bills (MTB)

MTB are short-term securities issued by the Government of Malaysia to raise short-term funds for Government's working capital. Bills are sold at discount through competitive auction, facilitated by Bank Negara Malaysia, with original maturities of 3-month, 6-month, and 1-year. The redemption will be made at par.

MTB are issued on weekly basis and the auction will be held one day before the issue date. The successful bidders will be determined according to the most competitive yield offered. Normal auction day is Thursday and the result of successful bidders will be announced one day after.

MTB are tradable on yield basis (discounted rate) based on bands of remaining tenure (e.g., Band 4= 68 to 91 days to maturity). The standard trading amount is RM5 million, and it is actively traded in the secondary market.

 

Malaysian Government Securities (MGS)

MGS are long-term bonds issued by the Government of Malaysia for financing developmental expenditure. MGS are fixed-rate coupon bearing bonds with bullet repayment of principal upon maturity while coupon payments are made semi-annually. Beginning December 2006, BNM has also introduced Callable MGS which provides the Government of Malaysia with the option to redeem the issue at par by giving an advance notice of five business days to the bond holders. Typically, the issue will be called in whole on specific coupon date(s), however these characteristics may vary in the future. Both MGS and MGS callable are issued via competitive auction by Bank Negara Malaysia on behalf of the Government. The successful bidders are determined according to the lowest yields offered and the coupon rate is fixed at the weighted average yield of successful bids.

An annual auction calendar which outlined the timing, tenure and issuance method (new issue/ re-opening) are pre-announced in the year-end for the subsequent year issuances to enhance market transparency and certainty. The actual issuance size is announced a week before the issuance date. The typical issuance size ranges from RM1 billion to RM4.5 billion depending on Government financing requirement. The Government is committed to continuously issue 3-year, 5-year, 7-year and 10-year MGS as benchmark securities as part of its efforts to develop the benchmark yield curve. The benchmark securities were often reopened to enlarge outstanding issue sizes in order to promote market liquidity. In addition, 15-year and 20-year MGS were also issued to lengthen the benchmark yield curve.

Secondary market for benchmark securities is liquid with average daily transaction volume varying from RM100 million to RM500 million. Standard transaction is RM10 million per lot. Trades are settled in two business days (T+2) and are quoted on a price basis to two decimal points. Neither stamp duty nor commissions are paid on the transfer of the securities. For transactions via money brokers, brokerage fee is payable.

 

Khazanah Bonds

Issued by Khazanah National Berhad (an investment holding arm of the Government of Malaysia) and guaranteed by the Government.

Last Updated : 05/03/2012 15:12 PM