KUALA LUMPUR, April 15 — Malaysia plans to sell 10- and 30-year global Islamic bonds in its first sale of the debt since 2011 and may give the final pricing as early as Wednesday, according to people familiar with the matter.

The initial price target for the 10-year securities was set at 135 basis points above similar-maturity US Treasuries, which currently pay 1.89 per cent. That would represent a discount from the 165 basis-point spread paid in 2011 for existing notes due in 2021. The 30-year portion will price at 185 points over US debt, which yielded 2.53 per cent.

The Southeast Asian nation is raising funds just as its foreign-exchange reserves plunged to the lowest since 2010 and to refinance US$1.25 billion (RM4.62b) of sukuk maturing in June. The sale will be a test of investor confidence as rising debt at state investment company 1Malaysia Development Bhd. and deteriorating government finances linked to the drop in oil 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 Najib Razak, who is chairman of the fund’s advisory board, is facing calls to step down from former premier 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 are the lead arrangers for the offering.

The yield on the 4.646 per cent 2021 notes fell four basis points, or 0.04 percentage point, to 2.77 per cent today, data compiled by Bloomberg show. The 2016 sukuk yield declined two basis points to 1.25 per cent. — Bloomberg