KUALA LUMPUR (July 16): National mortgage corporation Cagamas Bhd has issued Malaysia’s first sukuk and interest rate swap based on the new interbank benchmark.

The transactions, comprising a RM300 million one-year Islamic medium-term notes and RM RM100 million five-year Islamic profit rate swap, referenced the Malaysia Islamic Overnight Rate also known as MYOR-i, Cagamas said in a statement on Thursday.

“The transactions also demonstrate Cagamas’ readiness to operate in an evolving alternative reference rate environment while continuing to deliver innovative shariah-compliant market solutions,” said president Kameel Abdul Halim.

Malaysia’s central bank is transitioning away from the Kuala Lumpur Interbank Offered Rate, or KLIBOR, to price new financial contracts in the wake of widespread rate-rigging scandal uncovered by global authorities going back more than a decade ago.

The introduction of MYOR and its Islamic counterpart MYOR-i in 2021 marks a shift towards more robust benchmarks based on actual transactions rather than KLIBOR that relies on daily submissions from a panel of banks.

“The successful conclusion of the transactions reflects Cagamas’ role in supporting Bank Negara Malaysia’s initiative towards a more transaction-based rate-setting framework and advancing innovation in the domestic sukuk market,” Kameel added.

Proceeds from the latest issuances will finance Cagamas’ purchase of eligible financing assets from financial institutions.

The sukuk was jointly led by AmInvestment Bank and CIMB Investment Bank as lead managers, while the Islamic profit rate swap, which serves as a hedging tool in the transactions, was transacted with CIMB Islamic Bank.

The maiden issuances by Cagamas "set a vital precedent for the market, establishing a framework for future innovation in sukuk structuring while aligning with Bank Negara Malaysia’s aspiration for the industry to transition towards MYOR-i as market benchmark rate," said Chu Kok Wei, head of CIMB's group wholesale banking. 

The transaction "underscores our commitment to advancing a resilient, transparent and future ready Islamic financial market while supporting the continued development of Malaysia’s capital markets,” said Jamil Baharuddin, head of group treasury and markets at AmInvestment.