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Investment advice and corporate finance
Module 12Investment Management and Corporate FinanceModule 7 · Topic 3
Section 2 of Module 7 can supply up to 30% of the paper, and fixed income is its largest topic. Expect two kinds of item. The first tests the Malaysian market: what MGS, MGII, MTB, MITB and BNMN are, how Bank Negara Malaysia auctions them through principal dealers, the day-count and settlement conventions, and the RAM and MARC rating scales. The second is short calculations: compounding and discounting, bond prices, current yield, yield to maturity and call, accrued interest, and pricing Treasury bills on Malaysia's Actual/365 basis. Wrong options are built from predictable slips: 360 days instead of 365, discount rate confused with yield, annual instead of semi-annual coupons, and simple instead of compound interest.
8 min read7 sections
Checked October 2026 against: BNM Financial Markets Information Portal (Market Convention, Types of Securities, Method of Issuance, Trade Mechanism, Bond Pricing Agencies), financialmarkets.bnm.gov.my; ADB ASEAN+3 Bond Market Guide 2016: Malaysia, ch. III; RAM Ratings Rating Definitions & Indicators (ram.com.my); MARC Ratings Rating Symbols & Definitions (marc.com.my); SC Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework, revised 30 March 2026 (sc.com.my); RHB Bank and UOB Malaysia Bankers Acceptance product disclosure sheets; CFA Institute Level I fixed income and time value of money readings; SIDC Module 7 Study Outline, Topic 4. As at 12 October 2026. Independent prep, not endorsed by SIDC or the SC.
Bank Negara Malaysia issues government paper on behalf of the Government and its own notes for liquidity management. Its Financial Markets Information Portal sets out the features below; the ADB Malaysia Bond Market Guide confirms them.
| Instrument | Issuer and purpose | Return | Day count |
|---|---|---|---|
| MGS | Government; development spending | Fixed coupon, semi-annual | Act/Act |
| MGII | Government; Islamic (murabahah) | Profit, semi-annual | Act/Act |
| MTB | Government; short-term funding | Issued at discount, 3m/6m/1y | Act/365 |
| MITB | Government; Islamic bills | Discount; traded under bai' al-dayn | Act/365 |
| BNMN / BNMN-i | BNM; liquidity management, up to 3 years | Discount or coupon/profit | Act/365 (discount), Act/Act (coupon) |
Every note. Every question. One pass.
5 more sections of this note are part of Premium.
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Callable MGS (since December 2006) let the Government redeem at par on five business days' notice. Corporate issuers use commercial papers (short-term, within a year) and medium-term notes (more than a year).
Trap: calling BNMN government debt, or giving MTB a coupon. BNMN are BNM's own paper; bills pay no coupon.
Takeaway: MGS coupon bond, MGII Islamic bond, MTB/MITB discount bills, BNMN central bank liquidity notes.
New MGS are sold by competitive multiple-price auction on a yield basis, exclusively to Principal Dealers who bid through FAST; other institutions bid through a Principal Dealer. MGII tenders are open to Principal Dealers and Islamic Principal Dealers. The coupon on a new issue is the weighted average yield of successful bids. A reopening keeps the coupon, maturity and stock code, and bids are on price with accrued interest added.
Under the SC's Guidelines on Unlisted Capital Market Products (Section B Part 3), a programme involving CPs must not exceed seven years (para 2.15), stand-alone MTN programmes are exempt (para 2.16), and unlisted ringgit bonds must be tendered on FAST and settled in RENTAS (para 2.20).
Trap: applying new-issue rules to a reopening, or letting Islamic Principal Dealers bid directly for conventional MGS.
Takeaway: New issue bids on yield; reopening bids on price. MGS settle T+2, bills T+1.