KUALA LUMPUR: Malaysia's success in attracting US$9bil of orders for a US$2bil sale of sukuk reflects a one-year drought in global issuance by sovereign borrowers.
The nation's record dollar-denominated offering of US$1.2bil of five-year notes and US$800mil of 10-year debt was snapped up by more than 320 investors in Europe, Asia, the Middle East and the United States, the Government said in a statement yesterday. (source)
The yield on the existing 3.928% sukuk due in June 2015, the last international issue in May 2010, dropped eight basis points yesterday to 2.66%, prices from Royal Bank of Scotland Group show.
The offer drew interest from both the US$1 trillion Islamic banking industry and non-syariah-compliant investors who are favoring higher-rated Asian debt due to Europe's turmoil, according to CIMB-Principal Islamic Asset Management Bhd.
Companies in India, China, the United States and Pakistan have postponed debt sales this month as the odds of a Greek default pushed up their cost of borrowing.
“Malaysia's good credit standing, the rarity of sovereign sukuk and the need for funds to diversify risk probably helped to shore up interest,” Zeid Ayer, who helps oversee US$1.6bil at Kuala Lumpur-based CIMB-Principal Islamic and bought the five-year notes, said in an interview on June 29.
“Demand was stronger than the two-to-three times I expected,” he added.
Malaysia now has four global sovereign bonds, three of which are Islamic of different maturities. The nation's only non-syariah compliant dollar note of US$1.75bil matures on July 15.
There's currently US$29.9bil of global sukuk, which pay returns on assets to comply with Islam's ban on interest, outstanding including Malaysia's latest sale, according to Bloomberg calculations.
Malaysia's issuance of the world's first 10-year Islamic bonds may encourage other governments and local companies to sell longer-maturity notes, according to RAM Rating Services Bhd.
“More longer-dated Islamic paper are needed to help insurance companies and banks meet asset liabilities,” Zakariya Othman, the head of Islamic ratings at RAM said in an interview on Wednesday.
Pakistan's government deferred its plan to sell bonds in Oil & Gas Development Co, the nation's biggest energy explorer, because of the European debt crisis, Asad Amin, a spokesman for the finance ministry, said on Wednesday.
NTPC Ltd, India's largest power company, put off a US$500mil issue of dollar notes in Singapore, the Daily News and Analysis reported on its website.
Bank of America Corp postponed a sale of debt in Japan, citing the “market environment,” Takayuki Inoue, a Tokyo-based spokesman, said in an interview on June 21.
Malaysia's 2.991% notes maturing in July 2016 were issued to yield 145 basis points, or 1.45 percentage points, more than US Treasuries.
The difference for the 4.646% debt due in July 2021 was 165 basis points. Malaysia sold US$1.25bil of five-year dollar sukuk in May last year at a premium of 180 basis points.
The yield on the five-year bond dropped 10 basis points yesterday to 2.99%, RBS prices show. The rate on the 10-year security declined 12 basis points to 4.61%.
Indonesia delayed a sale of at least US$500mil of syariah-compliant dollar bonds to October, Rahmat Waluyanto, director-general at the Finance Ministry's debt management office, told reporters in Jakarta on June 20.
The yield on the country's sukuk sold in April 2009 dropped five basis points yesterday to 2.77% and is down 36 basis points this year, according to RBS. - Bloomberg
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