RAK sukuk yield falls to six-month low

Dubai: Yields on Ras Al Khaimah's Islamic bonds fell to the lowest in six months after the world's richest soccer club lent its name to a $1 billion resort (Dh3.67 billion) in the emirate.

The yield on RAK's 5.2392 per cent sukuk due January 2016 dropped 31 basis points since Real Madrid on March 22 announced the resort to 2.98 per cent yesterday. That compares with a 12 basis-point drop on Dubai's 6.396 per cent Islamic bonds due November 2014 to 4.26 per cent. Ras Al Khaimah's sukuk, yielded 2.92 per cent on May 10, the lowest since October.

The Real Madrid Resort Island, to be completed in January 2015 and targeted to attract 1 million visitors a year, will have a theme park, a museum and luxury hotels, according to the soccer club's website.

"RAK's sukuk ticks all the boxes, it's a sovereign in the UAE, it's an Islamic bond in a market where there are still shortages of these securities, and its investment grade," Aliasgar Tambawala, a fixed-income investment manager at Mashreq, said. "I'm sure the Real Madrid news has some impact because it brings RAK to headlines."