Middle East Bonds

Dubai Investments Park has given initial price thoughts of low 300bp over mid-swaps on its $300m five year debut sukuk, but investors are expecting much tighter pricing, with the note already trading up in the grey market around half a point.

The Central Bank of Bahrain will pay an 1.1% expected return on its latest BD20m ($53.2m) of short term sukuk al ijara – in slightly from last month’s 1.25%.

AmIslamic Bank is looking to put together Malaysia’s first Basel III-compliant sukuk programme, having received approvals from the Securities Commission and Bank Negara Malaysia. A subordinated deal of this kind will be closely watched to see if borrowers can address Bank Negara’s loss absorption clause on Basel III sukuk and what level of premium investors will require.

B Communications, a company that holds a stake in Israeli telco Bezeq, sold an increased debut high yield bond on Monday.

Fair value for Dubai Investments Park's five year sukuk is at 4.5%, according to one UAE based trader and a UAE based portfolio manager.

B Communications, the holding company of Israeli telco Bezeq, has dropped the planned euro tranche of its $775m high yield bond, and will issue only in dollars.

Total EM volumes are only marginally down on last year to date, at $71.3bn, despite secondary trading levels having been rocked by an emerging markets sell off over the last fortnight. The total volume of new EM paper sold is only $36bn lower than at this point in 2013, according to Dealogic data.

Export Import Bank of Malaysia (Mexim) launched its debut sukuk on Monday, also becoming the first Asian issuer to the international sukuk market this year outside short term paper. International Islamic Liquidity Management Corporation, also based in Malaysia, sold a $860m CP-style three month issue in January.

Sukuk’s advantageous pricing for borrowers over conventional bonds in recent years has evaporated in the Gulf – leaving only disadvantageous structuring costs in the Islamic market – but it does not follow that sukuk volumes are going to disappear too. Far from changing tack to bonds, for those who can issue both the rationale to favour sukuk is stronger than ever.

Prospects of a sukuk from Tunisia are looking up after the country said it plans to issue dollar denominated bonds and sovereign sukuk with guarantees by America, Japan and the Islamic Development Bank (IsDB), in the first half of 2014.

Real estate developer Dubai Investments Park will start a roadshow on Sunday for its debut issue as it aims to bring the first dollar sukuk from the Middle East of 2014, despite two weeks of volatile markets. The firm is planning a $300m five year sukuk.

Sukuk’s advantageous pricing for borrowers over conventional bonds in recent years has evaporated in the Gulf – leaving only disadvantageous structuring costs in the Islamic market – but it does not follow that sukuk volumes are going to disappear too. Far from changing tack to bonds, for those who can issue both the rationale to favour sukuk is stronger than ever.