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Key Fixed Income Terms

11 Dec 2023

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Fixed-income securities play a key role in diversified portfolios, offering stability and reliable income. However, the complex terminology associated with fixed income often leave investors confuse. This article aims to demystify key terms in fixed income, which we hope will allow you to better understand fixed income as an asset class.

Below are some key terms which we think you’ll likely encounter:

1. Tenor

Tenor refers to the duration or length of time until a fixed income instrument reaches its maturity or expiration date. This term is crucial as it helps investors understand the commitment period when investing in such instrument.

Knowing the tenor of the fixed income instrument allows investors to assess how external factors, market conditions, and economic trends may impact the performance of the investment, enabling them to make informed decisions based on their financial objectives and risk tolerance.

2. Maturity

The maturity of a fixed income instrument is the date on which the issuer repays the principal (face value of the instrument) to the investor.

3. Face Value

Face value is the amount owed to the holder of the fixed income instrument upon maturity.  

4. Redemption

The paying off or buying back of the fixed income instrument by the issuer, either before or at maturity.

5. Coupon

A coupon is a regular interest payment disbursed by the issuer to investors throughout the tenor of the fixed income instrument.

6. Coupon Rate

The coupon rate is the interest rate paid by the issuer to the investor based on the face value of the fixed income instrument. For example, if a fixed income instrument has a coupon rate of 5%, investors holding this instrument will receive periodic interest payments amounting to 5% of the instrument’s face value.

7. Credit Rating

Credit rating is a measure of the creditworthiness of the issuer, in other words, the financial ability of the issuer to meet interest and principal payment obligation. In Malaysia, there are two Securities Commission Malaysia approved rating agencies – RAM Ratings and Malaysian Rating Corporation Bhd (“MARC”).

8. Programme

Refers to an arrangement which allows issuer to issue multiple issuances within a specified period. This arrangement enables issuers to raise capital by issuing fixed income securities, often in various tranches, to meet their financing needs. It also streamlines the issuance process, allowing for smother and more efficient transactions.

Understanding the nuances of fixed-income investments is key to achieving financial stability and fostering growth in your portfolio. At KLDX, we recognise the importance of a diversified portfolio which includes fixed income opportunities. Our platform offers a seamless experience for you to explore a wide range of investment options. With a user-friendly interface and updated information, you can make informed decisions that align with your financial goals.

Join us by signing up on KLDX platform and embark on a journey towards financial success!

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