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Bond Investment Considerations

Generally, these are the key factors that an investor will consider before deciding in investing in bonds. However, the weight on these factors varies based on the investor's risk appetite, cash flow requirements, amount and several other factors.

 

Factors

Sub- categories

Details

Coupon

Fixed

Typically payable semiannually, but some are quarterly and monthly.

Float

Reset periodically to a specified prevailing market rate

Zero coupon bond

Payable at maturity

Price

Face value

Newly issue bond

 

 

Premium

When the price of the bond is above its face value

 

 

Discount

When a bond price is below its face value

Yield

-

Yield is the return on investment

Maturity

Short term

Less than 1 year

Long term

More than 1 year

Redemption features

Call

Provisions that allow the issuer to repay the investor's principal at a specified date before maturity

Put

Provisions that allow the investor the option of requiring the issuer to repurchase the bonds at specified times prior to maturity

Credit Quality

Government issues

Sovereign risk

Corporate bond and sukuk

For Malaysia , rating on bonds are done by RAM or/and MARC. Higher credit quality bonds are generally more expensive than the lower credit quality.

 

Factors

Sub- categories

Details

Coupon

Fixed

Typically payable semiannually, but some are quarterly and monthly.

Float

Reset periodically to a specified prevailing market rate

Zero coupon bond

Payable at maturity

Price

Face value

Newly issue bond

 

 

Premium

When the price of the bond is above its face value

 

 

Discount

When a bond price is below its face value

Yield

-

Yield is the return on investment

Maturity

Short term

Less than 1 year

Long term

More than 1 year

Redemption features

Call

Provisions that allow the issuer to repay the investor's principal at a specified date before maturity

Put

Provisions that allow the investor the option of requiring the issuer to repurchase the bonds at specified times prior to maturity

Credit Quality

Government issues

Sovereign risk

Corporate bond and sukuk

For Malaysia , rating on bonds are done by RAM or/and MARC. Higher credit quality bonds are generally more expensive than the lower credit quality.

 

 

Last Updated : 22/08/2016 15:44 PM