It seems all is not well in the world of Islamic bonds, known as Sukuk. In addition to declining Sukuk subscriptions, we now have news that Indonesia, the most populous Muslim nation in the world, which has rich oil wealth, held a Sukuk auction which was an utter failure.

On June 29th, the government of Indonesia failed to sell any Sukuk in an offering which was supposed to raise $110 million.

Indonesia began conducting Sukuk auctions in August 2008 and the results have been consistently disappointing in ten auctions since then. Investors are still spooked by the lack of liquidity in the thin secondary market for Sukuk. The amount of money raised from Indonesian Sukuk offerings in 2010 is so far down 40% from 2009 levels. This is an even steeper decline than the 23% global decline in Sukuk sales from 2009 to 2010.


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