Saudi-based Islamic Development Bank markets 5-year Islamic bond

REUTERS/Reem Baeshen

The Islamic Development Bank has given initial price guidance for a planned five-year Islamic bond at around mid-60s basis points over the five-year US secured overnight financing rate (SOFR), a bank document showed.

BNP Paribas, Credit Agricole, Dukhan Bank, Goldman Sachs, The Islamic Corporation for the Development of the Private Sector, JPMorgan, Mizuho , SNB Capital and Standard Chartered are joint lead managers on the sale, expected to price on Thursday, the document said.

The Jeddah-based multilateral lender last tapped the market in April, raising $1.6 billion in five-year sukuk.

New bond issues in the Gulf have plummeted this year amid volatile markets and rising interest rates.

But there were three snap issuances on Tuesday, when benchmark rates edged slightly lower, as Saudi Arabia raised $5bn with sukuk and bonds, Abu Dhabi wealth fund Mubadala raised $1bn and top Dubai bank Emirates NBD issued $500 million. 

Sukuk issuance in the first half of 2022 was $74.5bn, down from $93.3bn a year earlier and the lowest first-half total since at least 2019, according to a report by S&P Global. It attributed the decline to shrinking global liquidity, complex regulations and reduced borrowing needs among some Islamic nations. 

Bond prices and interest rates are inversely correlated because bonds pay a fixed interest rate, so lower interest rates make bonds more attractive and vice versa. Central banks and regulators in the US and Europe have hiked rates to try to tame soaring inflation