Luxembourg Puts Sukuk on Hold, Governor Yves Mersch Says

Luxembourg has put on hold plans to sell the government’s first Islamic bonds, Central Bank Governor Yves Mersch said.

“As of late, Luxembourg has had less need to issue,” Mersch told reporters at the Islamic Financial Services Board Summit in Luxembourg City today. “This might have influenced the decision to put the project on hold.”

Mersch in May 2010 said the country was considering selling Islamic bonds, without providing further details. Earlier this year the U.K., Europe’s largest market for Shariah-compliant financial products and services, canceled what would have been the first sale of Islamic bonds by a Western federal government.

Luxembourg is rated ‘Aaa’ by Moody’s Investors Service and ‘AAA’ at Standard & Poor’s, the highest investment grades. The nation has 4 billion euro worth of government bonds outstanding, according to data compiled by Bloomberg.

The German state of Saxony-Anhalt became the first European borrower to sell bonds adhering to Islamic law in August 2004 with 100 million euros ($144 million) of five-year sukuk, according to data compiled by Bloomberg.

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