Sukuk investors are maintaining support for Malaysian Prime Minister Najib Razak as he sacrifices budget deficit targets to sustain development spending.

Funds accepted a lower yield when the nation kicked off 2015's Islamic bond issuance on Jan 14, even as slumping oil prices strained government finances. The seven-year debt was sold at 4.19 percent, versus 4.22 percent in the secondary market. Bids totaled 2.53 times the 4 billion ringgit ($1.1 billion) on offer, the strongest demand since August. The ringgit fell 1 percent on Tuesday when Najib raised the deficit goal to 3.2 percent of GDP from 3 percent.

A plan by Barclays Plc to include Malaysian sovereign sukuk in its benchmark global index will widen the investor base and bring in more overseas cash, according to CIMB Group Holdings Bhd and Malayan Banking Bhd.

Najib's cut to the economic growth forecast and receding odds for a central bank rate increase are also supportive for bonds, said RHB Capital Bhd's Fakrizzaki Ghazali in Kuala Lumpur.

"The market is taking that as a comfort to be more active in government bonds, particularly sukuk," Fakrizzaki, a credit strategist at RHB Research Institute Sdn, a unit of RHB Capital, said on Wednesday. "If you look at the levels for the seven year, something which is above 4 percent may look attractive."

Malaysia has been hit by a 57 percent plunge in crude prices since June that is crimping revenue for Asia's only major oil exporter. Najib cut the 2015 growth forecast on Tuesday to 4.5 percent to 5.5 percent, from an October projection of as much as 6 percent.

The cost to insure the nation's sovereign debt for five years using credit-default swaps has climbed 30 basis points to 136 since Dec 31, CMA prices show. While that's more than 111 in Thailand and 97 in the Philippines, it's less than Indonesia's 156.

RHB and Maybank predict the central bank will keep its benchmark policy rate at 3.25 percent throughout 2015 after July's first increase in more than three years.

The prime minister has embarked on a 10-year, $444 billion spending program to build roads, railways and power plants in an effort to boost the economy. Malaysia will reduce its 2015 operating expenditure by 5.5 billion ringgit while maintaining the allocation for development, Najib said in a televised address announcing the data revisions.