Yields on Malaysia’s sovereign Islamic bonds are trading at the narrowest premium to Treasuries since they were sold, giving investors incentives to buy higher- returning sukuk after Dubai World’s debt restructuring agreement.
Malaysia’s 3.928 percent dollar-denominated Islamic notes due June 2015 fell 0.1 percent this month, according to prices from the Royal Bank of Scotland Group Plc. The debt yields 142 basis points more than Treasuries and has averaged 153 basis points over the past three months. Dubai’s sukuk, or bonds that comply with Shariah law’s ban on interest, returned 2.1 percent in September, according to data compiled by Bloomberg.
“Some investors may be attracted to the Gulf market and buying more Gulf papers after the Dubai World debt-restructuring deal,” Mohd Farid Kamarudin, who helps manage 1.3 billion ringgit ($417 million) of Shariah-compliant assets at Kuala Lumpur-based AmInvestment Management Sdn., a unit of the fifth- biggest sukuk underwriter this year, said in a Sept. 15 interview. “Malaysian sukuk may rally, especially toward the end of the year with new funds being created.”
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