DUBAI - Qatar National Bank, the Gulf's biggest bank by assets, has issued a $600 million Formosa bond as part of efforts to diversify its funding sources, a spokesman said, while sources said the issue was for 40 years.

Formosa bonds are sold in Taiwan by foreign borrowers and are denominated in currencies other than the Taiwanese dollar.

Morgan Stanley was the sole arranger of the transaction, two sources familiar with the matter said. The U.S. bank did not immediately respond to a request for comment.

The deal, which closed on Thursday, offered Asian insurers and other long-term investors securities that match their own long-term commitments, said one of the sources.

Gulf borrowers have begun the year by issuing sukuk, or Islamic bonds, as that market benefits from pent up demand from Islamic investors, largely based in the region.

Bahrain's sovereign fund Mumtalakat and the largest bank in the United Arab Emirates, First Abu Dhabi Bank, completed sukuk sales of $500 million each this week.

The Gulf debt markets weakened after the killing this month in a U.S. drone strike of a top Iranian commander, which had raised worries about a broader military conflict in the region. But regional bond yields have fallen back as tension has eased.

 

(Reporting by Davide Barbuscia; Editing by Edmund Blair) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: davide.barbuscia.reuters.com@reuters.net))