Cagamas concludes Malaysia’s 1st overnight rate-based floating bonds

The proceeds from the bonds will be used to fund the purchase of housing loans from the financial system


CAGAMAS Bhd has concluded its RM200 million one-year floating rate conventional medium-term notes (CMTNs), the first floating rate bonds based on Malaysia overnight rate (MYOR) reference.

According to Cagamas, the proceeds from the CMTNs will be used to fund the purchase of housing loans from the financial system.

“The conclusion of the RM200 million one-year CMTNs at the corresponding MYOR plus 83 basis points brings the company’s year-to-date issuance amount to RM8.7 billion,” Cagamas president and CEO Datuk Chung Chee Leong said in a statement today.

“The positive conclusion of this issuance reflects the strong commitment by Cagamas to support new developments introduced by Bank Negara Malaysia (BNM) for the financial markets.

“This latest issuance is also an important step in driving the adoption of new benchmark rates for financial instruments in Malaysia. We will continue to work closely with the regulators, industry partners and investors for a smooth transition in relation to the alternative reference rate (ARR),” he added.

This landmark transaction represents Malaysia’s and Cagamas’ first ever bond to be priced against MYOR, the new ARR for Malaysia, launched by BNM in September 2021.

Globally, ARRs are introduced by many market jurisdictions to improve the integrity of the financial benchmark rates as part of a transition to transaction-based rates, in-line with the London interbank offered rate reforms after the global financial crisis.

Separately, AmBank Group deputy MD (wholesale banking) group treasurer Jamzidi Khalid said the transaction complements the continuous efforts to develop and deepen Malaysia’s financial markets and it came just in time with the increasing interest rates.

“We are indeed honoured to partner Cagamas on this inaugural floating rate note (FRN) issuance referencing to MYOR.

“Incidentally, a FRN would benefit investors in an interest rate rising environment, as the returns would be reset semi-annually,” he said in a statement.