Business | Economy
Dollar debt recovery fails to fuel bond rally
Citigroup was close to a deal to sell down $12 billion of their $43 billion (as at the end of the first quarter) leveraged-loan book to a group of private equity firms.
- Special to Gulf News
- Published: 00:14 April 13, 2008
Dubai: Bond markets were relatively range-bound following a strong rally the previous week.
Capital injections again supported the market, with Washington Mutual the latest US financial to receive funding ($5 billion). Additionally it was reported that Citigroup was close to a deal to sell down $12 billion of their $43 billion (as at the end of the first quarter) leveraged-loan book to a group of private equity firms.
The deal was expected to close at 90 cents on the dollar. On a less positive note, Goldman Sachs 'Level 3' assets (illiquid, hard-to-value holdings) increased by 40 per cent to $96 billion, taking some shine off the firm's recent outperformance in the subprime slump.
The HSBC/DIFX sukuk and GCC (Gulf Cooperation Council) Aggregate Indices ended the week relatively flat following a sharp rally the week before. The previous week's recovery in dollar debt extended to GCC names, with both conventional bonds and sukuk continuing to trade well last week, with decent volumes and two-way flow.
Markets were underpinned by positive results from DP World (profit up 52 per cent) and a general rebound in risk appetite among regional institutional clients. Gulf financials have been particularly in demand, with local buyers finding value following the technical sell-off.
On a separate note, the DP World results were accompanied by the region's first conference call for bondholders alone. As the market continues its rapid development, this is a characteristic we should come to expect from future earnings announcements.
Dirham issuance
Last week's notice of the new dirham-denominated Dubai deal put pressure on the other outstanding dirham issuance, namely the Jebel Ali Free Zone (JAFZ) 2012 and the Emirates Bank 2013. This was further compounded on Wednesday, when a committee set up to examine the dollar peg recommended that the UAE leave its exchange rate policy unchanged.
Bonds dipped again as European clients reduced their holdings, but buying from GCC clients enabled the bonds to close the week unchanged. Price talk on the new Dubai deal is around Eibor+55 basis points, paying approximately 30-40 basis points less than the JAFZ and Emirates bonds.
- HSBC Dubai Fixed Income Trading
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