Borrowing From Ourselves

In Part 2 the government manufactured the benchmark price of time. Corporate bonds are where that price gets used. When a toll operator builds a highway, a bank strengthens its capital or a solar developer finances a plant, the money often comes from a bond priced as MGS plus a spread.

The corporate bond market is the transmission line between the sovereign curve and the real economy. It is larger than most people assume. Outstanding corporate bonds reached RM923.4 billion at the end of 2025, up from RM858.0 billion a year earlier. Last year was a landmark. Gross issuance of corporate bonds and sukuk hit a record RM174.4 billion, far above the RM124.2 billion of 2024.

01 / WHATThe fundamentals

A corporate bond is a company's promise to repay borrowed money on a fixed schedule. The investor lends a principal amount. The company pays a coupon, or a profit rate for sukuk, at regular intervals and returns the principal at maturity. The price investors demand is built in two layers.

The first layer is the risk-free rate, which in Malaysia is the MGS or GII yield for the same tenor. The second is the credit spread, the extra yield that compensates for the chance the company fails to pay and for the bond being harder to sell than government paper. A 10-year corporate bond priced at MGS plus 60 basis points simply means the company pays 0.60 percentage points more than the government would for the same decade of money.

Everything else in this article is about that second layer. Who gets a thin spread, who gets a wide one and who gets shut out entirely.

02 / WHOGovernment, private or listed?

All three issue corporate bonds. The distinction matters to investors because each type carries a very different kind of risk.

Government-linked issuers borrow for national projects outside the federal budget. Many carry a government guarantee, so investors price them almost like MGS. Economically they are an extension of the sovereign curve.

Listed and large corporates include banks, utilities, telcos, plantation groups and property developers. Financial institutions are the single biggest users. In 2025 the financial sector led the market with 33% or RM57.6 billion of total issuance, followed by real estate with RM27.0 billion. Banks issue bonds largely to meet regulatory capital requirements, which is why they dominate.

Private project companies are often unlisted and exist for a single asset such as an independent power plant, a highway or a solar farm. Bondholders are repaid from that one asset's cash flow, often backed by a long-term concession or power purchase agreement. The Tadau Energy green sukuk from Part 3 is a textbook example.

One point is worth clarifying. An issuer being listed on Bursa Malaysia does not mean its bonds are. Most Malaysian corporate bonds trade over the counter between institutions rather than on the exchange. The market is overwhelmingly institutional, which is exactly why the owner's view matters here.

The market is also broadening. In 2025, 48 new programmes came from first-time issuers and from sectors that had not tapped the market before, including Malaysia's first gold pawn-loan securitisation and deals from medical services and takaful.

03 / HOWCredit ratings and why they decide everything

In Malaysia a rating is mandatory. All issues of corporate bonds and sukuk must be rated by an agency recognised by the Securities Commission unless an exemption is granted. Two domestic agencies do this work. RAM was established in November 1990 and MARC was incorporated in October 1995.

A rating is an opinion on one question. How likely is this issuer to pay in full and on time? Agencies examine the business, cash flow, leverage, industry risk, management and structural protections such as guarantees or ring-fenced cash accounts. The result lands on a ladder.

The dashed line decides access. Pension funds, insurers and many unit trusts are restricted by mandate to investment-grade paper. A company that falls below BBB loses most of its potential buyers overnight on top of paying more. That is why a downgrade across that line is feared far more than any single notch higher up.

The Malaysian market sits heavily at the top of the ladder. RAM's rated portfolio stood at about RM930 billion in programme value in 2025, with more than 80% of ratings at AA3 or higher. The year brought 11 upgrades against two downgrades. The single default recorded was triggered by an accelerated guarantee payment notice and caused no investor losses because the guarantee paid.

04 / WHYBonds versus bank loans

Tenor is the headline advantage and there are others behind it. From an owner's view the difference comes down to who carries the risk and how long the money stays committed.

The deeper reason bonds suit infrastructure is a matching problem. A bank funds itself with deposits that can leave at short notice, so it prefers shorter loans. EPF and life insurers carry promises that last decades, so they want long assets. A 20-year highway bond matches the investor's liabilities to the project's life. That is the same captive-savings engine from Part 2, now working for the private sector. In that sense the title is literal. Malaysian companies borrow from the savings of Malaysians.

The trade-off is access. A bond needs a rating, a trustee, lawyers, an arranger and enough size to justify those fixed costs. Small and mid-sized companies rarely clear that bar, which is why they stay with banks.

05 / WHEREWhere the money went in 2025

The record year had a clear shape. Financial institutions and property developers took close to half of it between them. Everything else, from infrastructure and utilities to plantations, government-linked agencies and first-time issuers, shared the rest.

Follow the money to the beneficiary and the chain looks like this.

06Are corporate bonds more rewarding?

They pay more yield. Whether they deliver more return is a separate question. It is the most important distinction for investors.

A corporate bond pays more than MGS because the investor takes on three extra risks. The first is default risk, the chance the company does not pay. The second is liquidity risk, since corporate bonds trade far less often than government paper and can be hard to sell in a hurry. The third is downgrade risk, where the bond keeps paying but its market price falls because its rating slips.

There is a catch owners should see clearly. Because the market is dominated by large institutions chasing the same high-quality names, spreads on top-rated paper are often very thin. RAM attributed last year's record issuance to favourable yields, tight spreads and ample liquidity. When too much money chases too few strong issuers, the reward for taking corporate risk shrinks. Investors can end up accepting nearly government-level yields for genuinely corporate-level risk.

Against equities, corporate bonds are a different bargain entirely. The upside is capped at the coupon and principal. The downside in a default can be large. Bonds reward patience and credit judgment. Growth belongs to the equity holder.

07The owner's question: does the line reach everyone?

Part 1 asked whether national priorities such as energy transition and semiconductors can reach companies at a fundable cost or whether the pipeline only serves the highest-rated names. The data gives a clear answer. With over 80% of rated paper at AA3 or above, the bond market overwhelmingly serves strong, established and often government-linked issuers.

That is efficient for investors and safe for the system. It helps far less the mid-sized chip designer in Penang or the regional solar installer that will actually deliver the next stage of growth. Those firms remain dependent on banks, with shorter tenors and floating rates, which makes long-horizon investment harder.

The trailblazer opportunity for Malaysia is to widen the transmission line without weakening it. The tools already exist in the ecosystem. Credit guarantees through Danajamin. Securitisation that pools smaller loans into rated bonds. The SRI and green frameworks that attract dedicated capital. The 48 first-time issuers of 2025 suggest the door is opening. Whether it opens wide enough for the companies Malaysia's national strategies are counting on is the question worth watching.

A market that funds only AAA names transmits policy to the few. Its health is measured by breadth as much as by size.

08What this means for your desk

Next in the series is Short Duration and Cash, the reserve tank and the value of waiting.

Capital Compass is the institutional research unit of Trailblazer Empire. This article is educational and does not constitute investment advice or a recommendation to buy or sell any security. Issuance, outstanding and rating figures are drawn from RAM Ratings publications. The rating ladder describes general market structure and is not a rating of any issuer. Use of this site is subject to our Terms of Use and Privacy Policy.