(Bloomberg) -- Maldives dollar Islamic bonds jumped as the country’s central bank pledged to make coupon payments due in October.
The notes are on track for the best performance among emerging-market peers this month, according to data compiled by Bloomberg, after the country’s monetary authority, or MMA, said the government will make a payment on dollar Islamic bonds due on Oct. 8. The securities due in 2026 rose as much as 2.3 cents on the dollar to above 75 cents on Thursday. The nation faces a $25 million payment on its roughly $500 million of outstanding sukuk debt, according to data compiled by Bloomberg.
“There remains no doubt that the MMA and the government of the Maldives, together with all related government institutions, will be able to meet all future external debt obligations,” the bank said in a posting on its website Wednesday.
The statement appeared to at least temporarily soothe growing investor concern that the island nation was hurtling toward the world’s first sukuk default. With double-digit losses this year, the debt is the worst performer on the Bloomberg EM Sovereign Total Return Index.
Moody’s Ratings on Wednesday downgraded the nation further into junk territory, citing default risks over eroding foreign reserves. In August, Fitch Ratings cut the country and also warned of heightened default concerns.
The Maldives authority said in a statement last month that the officials are working on arranging a $400 million foreign-currency swap with India’s central bank and a green bond sale.
The latest developments offer “a small relief that will buy the Maldives authorities some time to search for a longer-lasting solution,” said Soeren Moerch, a portfolio manager at Danske Bank, adding that the notes should move higher on the news. “But it does not resolve the underlying issue of small net reserves and lack of consolidation of budget deficits.”
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