The lowest relative yields on Islamic bonds in more than two years may encourage issuers to tap the market after a 15 percent drop in new sales in 2010, helping revive interest among investors.
The difference between average yields for emerging-market sukuk and the London interbank offered rate narrowed to 282.7 basis points yesterday, the least since August 2008, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Albaraka Banking Group BSC, Bahrain’s biggest publicly traded Islamic lender, plans to sell Islamic bonds in the first quarter, while Albaraka Turk Katilim Bankasi AS, a Turkish Islamic bank, may make an offering this year, company officials said this week.
Spreads shrank in 2010 as debt restructuring in the Persian Gulf and government plans to spur investment by building roads, railways and bridges helped restore appetite for assets in the $1 trillion Islamic finance industry. Sukuk yields will rise this year along with interest rates globally, according to Kuala Lumpur-based CIMB-Principal Islamic Asset Management Bhd.
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