Bonds – why are they issued?

 Here are some Investing and Economic insights:

Bonds are a form of debt. It is a loan from investor to a company or government. So, bond investors are paid interest. The Islamic equivalent of bonds are called sukuk. Sukuk form a large chunk of the Malaysian bond market. As at end-October 2020, 63.5% of the Malaysian total bond market size of close to RM1.6 trillion1 were sukuk.

Why do government issue bonds / sukuk?

Government issue bonds / sukuk to raise money for development expenditures, working capitals and to promote the growth of the country.

Malaysian Government Securities (MGS) and Government Investment Issues (GII), which are long-term bonds, are issued by the Malaysian government to raise money for development expenditures. Meanwhile, Malaysian Treasury Bills (MTB) and Malaysian Islamic Treasury Bills (MITB) are short-term bonds issued to meet the government’s working capital requirements.

Why do companies issue bonds / sukuk?

Companies issue bonds or sukuk to raise money to finance new projects, maintain ongoing operations, expand business, or even to refinance their existing debts. This is an alternative way to getting bank loans or issuing new stocks.

Change in the value for Raiz portfolio holdings

Keep in mind that past performance is not a good indicator of future performance.

The Raiz philosophy is about saving and investing small amounts regularly so you can keep the momentum going.

Regular disciplined savings can help improve your financial position in the long run far quicker than choosing the best fund manager. 

Definition of the Week:

Bond

A loan from investor to a company or government, so investors are paid interest over a specific time period. Just like when you borrow money and pay it back with interest.