HSBC Holdings Plc helped start a group of indexes that includes benchmarks for global Islamic and Middle East conventional bonds to encourage trading as a global credit crunch delays sales and doubles spreads.

HSBC and the Dubai International Financial Exchange (DIFX), which lists almost $14 billion of bonds that comply with an Islamic ban on the receipt of interest, said on Monday the three indexes would help investors better gauge the value of their fixed income assets and encourage financial services to create products linked to them.

Gulf Arab bond sales, including Islamic bonds, or sukuk, surged in 2005 and more than doubled to $30 billion last year, according to HSBC, which helps arrange sales.

Investors have very much bought into the Middle East growth story, James Milligan, HSBC head of fixed income trading in the Middle East, told reporters in Dubai.

The region, where economies are surging on a near 5-fold increase in oil prices in the last six years, is on a lot of radar screens, said Milligan, whose HSBC saw its Middle East bond trading business triple in the first half of the year, compared with the year-earlier period.

Still, Middle East bond sales will probably fall this year for the first time since at least 2003 after the mortgage crisis in the United States made investors less enthusiastic about riskier assets, and pushed up the cost of borrowing.

There could well be a drop-off compared with last year, Milligan said. Sales of a fairly substantial volume of Middle East bonds that had been planned before the crisis broke in June have been delayed, Milligan said, without being specific.

This is a hiccup for the moment, Milligan said. We are expecting volumes again to pick up substantially.

Gulf Arab bond sales total $24 billion so far this year, of which about 60 percent, or $14.4 billion, comply with Islamic law, according to HSBC. That compares with Islamic bonds sales last year of about $9 billion.

Spreads for more than $15 billion of Islamic bonds that are part of the HSBC-DIFX Sukuk index have more than doubled over the London Interbank Offered Rate (Libor) to 125 basis points, compared with about 65 basis points since the end of June, according to HSBC.

For debt in the Middle East Conventional Bonds index , including about $15 billion of Lebanese government securities, spreads have risen about 42 percent to 185 basis points over Libor, from 130 at the end of June, according to HSBC.

Dubai Investment HSBC