Malaysian and Indonesian pension funds, which have a combined $192 billion of assets, say plans to increase holdings of Islamic bonds are being hampered by a shortage of investment-grade sukuk.
Yesterday we pointed out that Yemen had floated a sukuk with a projected 1-year return of between 15% and 18%, a sure sign of risk-a “junk sukuk” you might say.
Now we find out that there are so few investment grade sukuk that Malaysian and Indonesian pension funds can’t find enough to buy.
This of course raises some serious questions:
• How many non-investment grade sukuk are out there?
• Is there another sukuk bubble getting ready to burst at some point in the future?