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Critically describe FOUR money market instruments traded in Malaysia.

The money market is a place whereby medium and short-term instruments are
being traded exclusive from the capital market, which dealt with long-term investment. It
is channeling of funds from surplus to deficit parties, match and manage the combination
of maturity of banks assets and liabilities, distribution of funds at low transaction costs,
and also function of liquidity distribution.
The Malaysian Government Securities (MGS) portfolios are designed to
maximize yields while allowing for the opportunity of capital appreciation via
deployment of the appropriate duration, issues, and yield curve. The management of
portfolio positions is via duration management and the coupon return is via the
optimization of the portfolio yield. It is an interest bearing long-term bonds issued by the
Government of Malaysia (GOM) with an original maturity of more than one year.
The Malaysian Treasury Bills (MTBs) is a zero-coupon short-term securities
issued by the Federal Treasury of Malaysia for working capital. Bills are sold through
competitive auction, facilitated by Bank Negara Malaysia, with original maturities of 3
months, 6 months, and 1 year. So, it is a short-term securities issued by the Government
of Malaysia with original maturity of less than one year.
Bank Negara Monetary Notes (BNM Notes) are securities issued by Bank Negara
Malaysia replacing the existing Bank Negara Bills (BNB) for purposes of managing
liquidity in both the conventional and Islamic financial market. The maturity of these
issuances has been lengthened from one year to three years however, this is not intended
to signal any targeted level of long-term interest rates. The Overnight Policy Rate
remains the sole indicator of the monetary policy stance while short-term and long-term
interest rates at other maturities will continue to be market determined, reflecting overall
demand and supply conditions as well as prevailing interest rate expectations in the
financial market.

The Government Investment Issues (GII) is another form of marketable

government debt securities issued by the Government of Malaysia to raise funds from the
domestic capital market to finance the Governments development expenditure. GII is
Islamic securities issued in compliance with Shariah requirements and is an alternative
debt instrument for the Government. GII is issued under the Government Funding Act
1983 to enable the Government of Malaysia to raise funding in accordance with the
Shariah principles. The terms and conditions of the GII are governed by, and construed in
accordance with, the laws of Malaysia.
The Malaysian Islamic Treasury Bills (MITB) is a short term money market
instrument issued by the Government under the Islamic principle of Bai al-Inah. Under
Bai al-Inah contract, the Government will undertake to sell identified asset to successful
Financial Islamics on cash basis at a discount and subsequently buy back the same asset
at par on deferred payment. MITBs are issued by BNM on behalf of the Government to
raise short-term funds for the financing of Government expenditure. The instruments are
issued using Islamic principles which are deemed acceptable to Shariah requirement.
MITBs are issued and traded based on a discounted basis and the tenors issued are
between 21 days to 1 year.