Defaults undermine new Islamic bond issues and Islamic finance � ArabianMoney

Investors who believed Islamic bonds would somehow be better protected against adversity have had their confidence undermined by four defaults that have returned issuance to the 2005 level of $2.5 billion so far this year.

Yields on sukuk or Islamic bonds are rising – and therefore bond prices are falling – despite a decline in traditional debt interest rates. Bloomberg reported that the average yield on GCC sukuk is 6.99 per cent by comparison with 5.35 per cent for non-Islamic GCC bonds.