The islamic republic of pakistan issued its first sukuk transaction in nearly a decade last Wednesday, taking advantage of strong liquidity in the Islamic bond market with a US$1bn five-year print. This was the sovereign's second US dollar transaction of the year, having raised US$2bn through a dual-tranche conventional offering of five-year and 10-year paper in April. Those 7.25% due April 2019 conventional notes were the main reference point for the sukuk. Over the past six months, the bonds have tightened significantly to be quoted at a yield of about 6.45%, according to Thomson Reuters Eikon prices. Pakistan, which has ratings of Caa1 from Moody's and B- from S&P, began marketing the sukuk offering at a profit rate of 6.875% area before issuing guidance of 6.750%-6.875%. With demand reaching US$2.3bn, including lead orders, the sukuk issue was eventually priced at the tight end of that range, at 6.750% - a much more favourable level than the weighted cost of comparable domestic debt of about 11%.
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