A flood of money into the bonds of Saudi Arabian property developer Dar Al Arkan is due to renewed confidence in the company’s ability to repay its debt, but also to a general scramble to buy Saudi assets as the economy booms.
The yield on the company’s $1 billion, 2.817 percent floating rate sukuk, due to mature this July, has plunged from above 25 percent at the start of January to around 8 percent now as it became clear the Islamic bond would be repaid on schedule.
That drop has probably run its course now, traders say, but the yield on the company’s 2015 maturity may have further to fall. It has already dropped to 10.7 percent from 14 percent at the start of the year. But the yield on the 2012 sukuk has returned to its 2011 low; a similar move by the 2015 sukuk would bring it to 10 percent.
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