January 20, 2014 / 10:51 AM / 4 years ago

UPDATE 1-Islamic finance body IILM boosts sukuk programme with $860 mln issue

(Adds context, information on trading)

DUBAI, Jan 20 (Reuters) - The Malaysia-based International Islamic Liquidity Management Corp expanded its sukuk issuance programme on Monday by auctioning $860 million of three-month Islamic bonds at a yield of 0.55635 percent.

The issue brings the total amount of the IILM’s outstanding sukuk to $1.35 billion, the body said in a statement. Its programme, launched last year, envisages issuance increasing eventually to as much as $2 billion.

The IILM, owned by a consortium of central banks from Asia, the Middle East and Africa, is seeking to help Islamic banks manage their short-term funding needs by easing their shortage of liquid, investment-grade financial instruments.

Monday’s issue was sold to nine primary dealers from Asia, the Middle East and Europe.

The IILM’s ultimate aim is to encourage the development of an active, cross-border secondary market in sukuk, but a lack of liquidity has so far prevented that.

Since the programme’s launch, primary dealers have held on to the IILM instruments after auctions and there has been little if any secondary market trade in them, an official at one of the primary dealers told Reuters. (Reporting by Andrew Torchia; Editing by Mark Heinrich)

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