Yields on Asia dollar Islamic bonds have slumped to the lowest levels in three months relative to local-currency debt on evidence that the U.S. economic recovery is flagging as growth accelerates across the region.
The difference between the yield on the Malaysian government 3.928 percent five-year dollar sukuk and the similar-maturity 3.86 percent ringgit Islamic note widened five basis points this month to 67, prices from Bursa Malaysia and Royal Bank of Scotland Group Plc show.
The gap grew 52 basis points in July and reached 76 on Aug. 19, the most since the dollar bonds were sold in May.
OSK-UOB Unit Trust Management Bhd. and HwangDBS Investment Management Bhd. say Islamic dollar notes may keep rising as new issuance slows and demand climbs for foreign-currency securities from global emerging-market funds.
The drop in yields on local- currency debt has been limited as the biggest economies in Southeast Asia expanded at least 6 percent in the second quarter, almost three times faster than the U.S.
Investors think the economy is so bad in the U.S. that interest rates will be kept low so they are coming to this region to get better yields, according to Mohd Noor Hj A Rahman, the head of the Islamic unit of OSK-UOB in Kuala Lumpur, said in an interview yesterday. In the domestic market, people would go for equity and not bonds when the economy is good.
--Bloomberg omar1.1 iimm.bnm.gov.my
