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Market Spotlight

Islamic bonds come under microscope after Garuda Indonesia default

Rating agency highlights legal uncertainty as issuance reaches new high

Flag carrier Garuda Indonesia's default on a payment is raising questions over the resolution of non-remittances in Islamic bonds. (Nikkei montage/Reuters/Getty Images/Akira Kodaka)

JAKARTA -- Investors in the booming global market for Islamic bonds, or sukuk, have little clarity on how defaults in the sector will be resolved, even as issuance tears toward an annual record.

The uncertainty has been brought to the fore in recent weeks after the airline Garuda Indonesia defaulted on a payment, while attempts to standardize the industry remain in their infancy.

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