Sukuk Rally Shows Strength in Indonesia Demand: Islamic Finance

An eight-month rally in Islamic bonds showed its resilience as an Indonesian sukuk drew record bids before debuts by Luxembourg, Hong Kong and South Africa. A Bloomberg index tracking dollar-denominated Shariah-compliant debt from 43 sovereign and corporate issuers rose to an all-time high this week, as supply was limited amid the worst quarter for new issuance since 2010. Luxembourg and Hong Kong have hired arrangers for their sales planned for September. South Africa has hired banks for its debut offering of Shariah-compliant notes, while Bangladesh and Tatarstan are also planning maiden sales. While the average yield on debt that complies with Muslim tenets has dropped to a three-month low, it’s almost twice that available on U.S. Treasuries.