Sukuk So-called "Islamic bonds"
From the Financial Times,
Britain looks set to become the first western country to introduce a regulatory regime to support the domestic issuance of sukuk so-called "Islamic bonds", or those which do not pay overt interest.(Emphasis added)Now 85 percent of all bonds issued in the [Gulf region] are sukuk. So what are sukuk so-called "Islamic bonds"? In a story from Ocnus.Net
the Swiss investment bank will launch an instrument that claims to be the world’s first sharia-compliant investment product linked to commodity prices.Banker Middle East has this to say about Sukuk:[...]
...the proposed note will be linked to the copper, nickel and US oil benchmark price, West Texas Intermediate. Or as Peter Ghavami, global head of commodities at UBS, adds: “Commodities is something real and something that is understood very well in the region, so it made a lot of sense to look to develop sharia-compliant products that are linked to commodity prices.”
Sukuk are securitised assets and therefore belong to the category of Asset Backed Securities. Unlike conventional ABS structures, Sukuk need to have an underlying tangible asset transaction either in ownership or in a master lease.Expect to see more Sukuk as more money flows East in exchange for oil. It may mean that one source for purchase of treasuries will dry up if investors in the Middle East want asset backed securities. Slowly, whether the U.S. likes it or not, we are being drawn inexorably back to money backed by assets and away from fiat currencies. Wouldn't that be great!
