Bahrain has received “positive” feedback from investors for its plan to sell $1 billion in Islamic bonds next month, Central Bank Governor Rasheed al-Maraj said.
The maturity of the sukuk may be between seven to 10 years, Maraj said in an interview yesterday at Bloomberg’s headquarters in New York. The Persian Gulf island-kingdom plans to use the money to help finance a budget deficit of about 5 percent of gross domestic product, Maraj in a separate Sept. 25 interview at the International Monetary Fund in Washington.
“The sukuk market has been in general more stable than the conventional market,” he said yesterday. “That’s why we’ve opted for sukuk. Our feedback so far has been positive.”
Protests this year in Bahrain, led by the majority Shiite Muslims who are demanding more political rights from Sunni rulers, have slowed economic growth and raised questions on the country’s image as a regional financial center.
Global sales of sukuk, which pay asset returns to comply with Islam’s ban on interest, climbed to $17.4 billion in 2011 compared with $10.9 billion in the same period last year, data compiled by Bloomberg show. Sovereigns in the Middle East have not sold Islamic debt so far this year, Bloomberg data show.
Maraj said Sept. 25 he’ll seek to keep borrowing costs between 200 basis points and 230 basis points over U.S. Treasuries. The yield on Bahrain’s 6.247 percent sukuk maturing June 2014 rose one basis point to 3.12 percent yesterday, according to prices compiled by Bloomberg.
Bahrain’s default risk has jumped 93 basis points, or 0.93 of a percentage point, this month to 386, the highest level since June 2009 according to data provider CMA. The credit default swaps of Egypt, the Arab country where a popular revolt toppled President Hosni Mubarak this year, surged 95 basis points this month to 486, according to CMA, which is owned by CME Group Inc. (CME) and compiles prices quoted by dealers in the privately negotiated market.
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