Lower sukuk yield on Fed move
THE yield on Malaysian-issued sukuk has relatively shrunk from its all-time high in 2011 as the United States Federal Reserve's (Fed) decision to maintain stimulus efforts spurred demand for long-term debt.
According to data provided by Bank Negara Malaysia, borrowing costs for sukuk with a 10-year maturity have fallen three times as fast as those on two-year maturity period over the past six weeks, thus narrowing the spread to 73 basis points from its peak of 85 basis points on September 2, the highest since April 2011.
According to a Bloomberg report, the difference has grown bigger by 53 basis points after the Fed indicated that it may trim bond purchases this year.
The yield is expected to stay around the current levels, at least until 2014 Budget is announced next Friday.
The Bloomberg-AIBIM Bursa Malaysia Sovereign Shariah Index, which tracks the most-traded local-currency bonds, changed a little last week at 112.037, after touching a three-month high of 112.103 last Monday.
The gauge is still down, however, from the year's peak of 112.59 in May.
Malaysia's Islamic finance industry, considered more prominent compared with other global hubs, provides a sizeable contribution to the local economy.
The ongoing and slated government projects will help to narrow the ongoing budget deficit to four per cent of gross domestic product this year, compared with 4.5 per cent last year , and a 12-year high of 6.7 per cent in 2009.