Dubai Yield Gap to Malaysia Shrinks as Debt Restructured: Islamic Finance - Bloomberg

Dubai’s borrowing costs relative to Malaysia’s sank to a record as the emirate makes progress restructuring debts.

The extra yield investors demand to own Dubai’s 6.396 percent dollar bond rather than Malaysia’s 3.928 percent sukuk dropped to 251 basis points yesterday, the lowest ever, according to data compiled by Bloomberg. The gap has narrowed 66 basis points since state-owned Dubai World signed an accord with creditors to alter terms on about $25 billion of debt on March 23. Dubai also benefited from a 64 percent jump in flows to higher-yielding bonds in the first quarter, according to data from Cambridge, Massachusetts-based research firm EPFR Global.

“Investors are finding Dubai’s sukuk attractive because of the relatively higher yields, and the low risk associated with the emirate’s public debt,” Aziz Oujdi, an Abu Dhabi-based portfolio manager at Al Hilal Bank, a Shariah-compliant lender owned by the Abu Dhabi Investment Council, said by phone April 3. “The Dubai World debt deal has helped restore confidence in Dubai’s ability to repay its debts.”