Record sukuk yields hamper budget balance

Kuala Lumpur

MALAYSIAN Prime Minister Najib Razak's goal of reining in the budget deficit looks set to get tougher as a unit of the nation's biggest lender predicts that borrowing costs on Islamic bonds will climb to a record.

Maybank Islamic Asset Management Sdn said that benchmark sukuk yields will rise to 5 per cent, adding to an increase that has complicated Mr Najib's efforts to fund a US$444 billion development programme. That also paints a bleak picture for companies in the world's top syariah-compliant debt market after contending with a slide in the ringgit last year that made it Asia's worst performer.