Malaysia sukuk sale lures weakest demand in 2015 on 1MDB concern
KUALA LUMPUR (July 30): Malaysia attracted the weakest demand at a sovereign sukuk auction in almost eight months amid concern it will need to bail out a state-owned investment company.
The Treasury sold 3.5 billion ringgit ($916 million) of Shariah-compliant bonds due October 2025 to yield 4.105 percent on Thursday, according to data published on the central bank’s website. The bid-to-cover ratio of 1.85 was the lowest since Dec. 5, data compiled by Bloomberg show.
Prime Minister Najib Razak removed his deputy Tuesday as he seeks to head off a public rift within his cabinet over his handling of financial probes into debt-ridden 1Malaysia Development Bhd. The state-owned entity’s borrowings totaled 41.9 billion ringgit ($11 billion) at the end of March 2014.
“There is less interest because people are unsure of the contingent liabilities from 1MDB,” said Nizam Idris, the Singapore-based head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. “The domestic political uncertainty also has a part to play.”
The yield on the existing 3.99 percent Islamic government bonds due October 2025 declined three basis points to 4.1 percent as of 2:18 p.m. in Kuala Lumpur Thursday, according to Bursa Malaysia prices.
The ringgit weakened 0.1 percent to 3.8150 a dollar, prices from local banks compiled by Bloomberg show. That took its decline in 2015 to 8.3 percent, the worst performance in Asia.