Islamic Bond Yields Rise in Malaysia’s First 2014 Sukuk Sale

Malaysia’s Islamic bond yield rose at its first sale of the debt in 2014 as the Federal Reserve’s stimulus cuts push up global borrowing costs.

The April 2019 notes, a reissue of sukuk originally sold in October, yielded 3.953 percent, compared with 3.91 percent in the secondary market when the central bank announced the results on its website at about 12:48 p.m. in Kuala Lumpur. The rate on the existing securities has since climbed to 3.97 percent, the highest level since Jan. 6, data from Bursa Malaysia shows.

Malaysia’s inflation probably accelerated to 3.1 percent in December, the fastest pace since November 2011, economists in a Bloomberg survey predict before government data tomorrow. While yields climbed, today’s 3.5 billion ringgit ($1.1 billion) offering still attracted orders of 1.96 times, the highest ratio since September, according to figures from Bank Negara Malaysia.

“It appears to be the norm now that people can get some bargains by bidding in the primary market,” said Winson Phoon, a Kuala Lumpur-based fixed-income analyst at Maybank Investment Bank Bhd., a unit of the nation’s largest lender. “The general perception is still that the mid- to long-term yield performance is going to be on an upward bias.”

Falling Ringgit

The ringgit weakened this year, along with other Asian currencies, as the Fed began paring its bond-buying program, a policy that had driven demand for emerging-market assets. The currency dropped 1.5 percent to 3.3255 per dollar in 2014, the second-worst performance among the region’s 11 most-active exchange rates after the Philippine peso’s 1.7 percent loss.

The Philippines failed to sell all of its planned debt at an auction today amid the fastest inflation in two years and the slump in the peso.

The Bureau of the Treasury accepted 9.62 billion pesos ($213 million) of bids for sovereign notes due in April 2016 at an average yield of 2.399 percent, compared with 2.054 percent at a sale in July, official data shows. About 25 billion pesos was offered.

Accelerating inflation and the scaling back of Fed stimulus pushed yields higher, Philippine Treasurer Rosalia de Leon told reporters in Manila.

Malaysia plans to hold 28 bond sales this year, including 12 for Shariah-compliant securities and 16 for non-Islamic notes, the central bank’s auction calendar shows. The treasury issued 4 billion ringgit of conventional debt maturing in July 2024 at 4.181 percent on Jan. 9, with a bid-to-cover ratio of 1.81 times, according to the central bank’s website.

Global investors held 29 percent of the nation’s sovereign bonds at the end of November, compared with 32 percent in Indonesia and 18 percent in Thailand, according to data from the central bank and finance ministry.

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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