Convertible Islamic debt sold by Dana Gas PJSC and Aldar Properties PJSC are headed for the best quarter in a year, a sign the Persian Gulf market is reviving.
Dana Gas 7.5 percent bonds due October 2012 yielded 10.77 percent yesterday, down from 13.6 percent on June 30, according to data compiled by Bloomberg. The United Arab Emirates energy company has operations in Egypt and Iraq. The yield on the 5.767 percent sukuk due November 2011 issued by Aldar, Abu Dhabi biggest real-estate developer, was 7.30 percent, after falling below 10 percent on Aug. 17.
The combination of plunging yields in developed markets and a successful restructuring of state-owned Dubai World $14.4 billion of debt may spur more gains, said Holinger Asset Management and DWS Investments GmbH, which hold Dana Gas and Aldar sukuk respectively. Islamic debt is typically backed by assets because the religion bars payment of interest.
You still get nice yield pick-up in Dana Gas plus some potential upside on the equity option, Tobias Bettkober, who helps manage $400 million at Holinger in Zurich, said in an interview yesterday. In terms of yield, we suddenly got a flat world, meaning 5 percent is the new high yield.
U.S. non-investment grade bond yields averaged 8.49 percent yesterday, down from 9.18 percent on June 30, according to Bank of America Merrill Lynch U.S. High Yield Master II Index. Two- year Treasuries yielded 0.50 percent.


--Bloomberg omar1.1 iimm.bnm.gov.my