Signs of life in sukuk market

By Reuters
The Gulf's once red-hot Islamic bond (sukuk) market is coming back to life after a nine-month lull as sellers look to benefit from talk of Gulf currency revaluation and rock-bottom interest rates, bankers said.

Still, with more of the bonds priced in local currencies – limiting interest from foreign buyers – the pace may not be quite as feverish.

A global credit crunch triggered by defaults on US home sales last summer prompted several firms to scrap sukuk sales as borrowing became more expensive. "Local currency sukuk are coming back to life and I think that will continue because there's huge liquidity in the system and issuers really want to take advantage," said Jaafar Badwan, a managing director at Bahrain's Unicorn Investment Bank.

All but one of the new sales are in Gulf currencies, increasing the value of future bond returns. Most sukuk were previously priced in US dollars. A key driver behind recent sukuk issuance has been falling benchmark interest rates in the region, which help keep spreads looking attractive.