KUALA LUMPUR, April 16 ― Malaysia sold US$1.5 billion (RM5.5 bilion) of 10- and 30- year global Islamic bonds in its first sale of the debt since 2011.

The Southeast Asian nation issued US$1 billion of 10-year securities to yield 3.04 per cent, or 1.15 per centage points over similar-maturity US Treasuries, according to data compiled by Bloomberg. The country also priced US$500 million of 30-year bonds paying 4.24 per cent.

Malaysia is raising funds just as its foreign-exchange reserves plunged to the lowest since 2010 and to refinance US$1.25 billion of sukuk maturing in June. The sale tested market sentiment toward the country as rising debt at state investment company 1Malaysia Development Bhd and deteriorating government finances linked to the drop in oil prices prompted Fitch Ratings to warn there’s a risk of a sovereign downgrade.

Malaysia has three government Islamic bonds outstanding, due in 2015, 2016 and 2021. It has no conventional foreign-currency notes.

1MDB has drawn criticism from Malaysian lawmakers because of its RM41.9 billion of debt and the government’s provision of a RM950 million credit facility in March. The company missed a loan repayment in November before settling it in February. Prime Minister Datuk Seri Najib Razak, who is chairman of the fund’s advisory board, is facing calls to step down from former prime minister Tun Dr Mahathir Mohamad.

Yields drop

Andrew Colquhoun, head of Asia Pacific sovereign ratings at Fitch, said in a March interview that there’s more than a 50 per cent chance Malaysia will be downgraded with a second-quarter review due.

Fitch, Standard & Poor’s and Moody’s Investors Service all rank Malaysia the fourth-lowest investment grade. The cost of insuring the nation’s debt from default for five years has dropped 29 basis points to 122 from a 16-month high in January, CMA prices show.

HSBC Holdings Plc, CIMB Group Holdings Bhd and Standard Chartered Bank Plc managed the offering. ― Bloomberg