Islamic bonds are poised to advance for a fourth straight quarter and post their longest stretch of gains since 2007 as increased confidence in Persian Gulf issuers’ ability to pay obligations helps lure funds.
Sukuk handed investors a 4.9 percent return in the third quarter, according to HSBC/NASDAQ Dubai US Dollar Sukuk Index, extending a rally of 0.8 percent in the previous three months and a 5.1 percent gain in the first quarter. The last time Islamic bonds posted a yearlong winning streak was three years ago when issuance rose to a record.
Emerging-market bond funds took in $1.05 billion in the seven days to Sept. 22, a 17th consecutive week of gains, according to Cambridge, Massachusetts-based research firm EPFR Global. The combination of declining sukuk sales and investors’ global hunt for higher-yielding assets is spurring demand for Islamic notes, according to Dubai investment banks Rasmala Investment Bank Ltd. and Royal Capital PJSC. Dubai World’s creditors’ accord last month to reorganize $24.9 billion of debt reduced the risk the state-controlled company will default.
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