KUALA LUMPUR (Feb 22): Bank Negara Malaysia (BNM) said investors had oversubscribed for the Malaysian government's RM4.5 billion worth of Islamic bonds or sukuk, which were issued on Tuesday (Feb 22) after RM7.87 billion worth of bids were placed for the RM4.5 billion Government Investment Issues (GII) during a tender exercise between Thursday (Feb 17) and Monday (Feb 21).

In a filing with BNM’s Fully Automated System for Issuing/Tendering (FAST) website, the central bank said investors placed 237 bids for the RM4.5 billion worth of GII, which come with an annual profit rate of 4.369%.

The GII’s maturity date is on Oct 31, 2028, according to BNM.

According to the GII’s prospectus, BNM will on the maturity date of the investment credit the current account of each participating investing institution or depository institution with the principal monies.

BNM said investments for the GII will be redeemed at par on Oct 31, 2028.

"Profit is payable half-yearly on April 30 and Oct 31 and the first such payment on the additional issues will be made on April 30, 2022, calculated from Oct 31, 2021 at the profit rate of 4.369%. 

"Profit on the principal monies shall cease after the maturity date of this stock,” BNM said.

UOB Global Economics & Markets Research rates strategist Victor Yong wrote in a note on Thursday (Feb 17) that including the supply from the RM4.5 billion worth of GII issued on Tuesday (Feb 22), Malaysia's seven-year GII benchmark’s outstanding value will total RM24.5 billion compared to RM3 billion and RM5 billion for the off-the-run 2028 bonds.

"Even with this large outstanding supply difference, the seven-year on-the-run [GII] was trading richer to off-the-runs up until the start of this year (2022). 

"This premium for Oct 2028 has since been whittled away and we do not expect to see a return of a significant on-the-run premium, at least of the order of magnitude that was seen last December,” Yong said.

In government bond investment terminology, off-the-run securities refer to bonds which have been issued earlier and remain outstanding.

Meanwhile, on-the-run securities refer to the latest bond issuance for maturity on a scheduled date. 

According to BNM’s website updates, the trading yield on Malaysia’s seven-year GII which mature in October 2028 closed up one basis point at 3.62% on Monday (Feb 21).

BNM said RM391.11 million worth of seven-year GII were transacted.