Gulf Islamic bond yields fell for a third month as a scarcity of sukuk and Europe’s debt crisis prompted local investors to favour the oil-rich region.
Average yields on sukuk from the six-nation Gulf Cooperation Council slid 20 basis points, or 0.2 percentage points, last month to 3.18 per cent August 31, according to the HSBC/Nasdaq Dubai GCC US Dollar Sukuk Index. That compares with a nine basis-point drop to 4.74 per cent for emerging market bonds, according the JPMorgan Chase & Co’s EMBI Global Diversified Blended Yield index. Ten-year US Treasuries yielded 1.55 per cent on August 31.
Economic growth in the GCC, home to about half of the world’s proven oil reserves, will reach 5.3 per cent this year compared with a contraction of 0.3 per cent in the 17-country euro area, the International Monetary Fund forecasts. The Islamic finance industry is set to expand to $2.8 trillion (Dh10.2 trillion) by 2015, according to the Kuala Lumpur-based Islamic Financial Services Board. Gulf sukuk have also benefited from appetite for higher-yielding assets, according to Union Investment Privatfonds.
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