Business | Markets
Negative sentiment reduces new international bond issues
US non-farm payrolls dropped 84,000 in August, completing a run of eight successive monthly falls, causing 10-year US Treasuries to pierce 3.6 per cent for the first time since April.
- HSBC Dubai Fixed Income Trading
- Published: 23:28 September 6, 2008
Dubai: US non-farm payrolls dropped 84,000 in August, completing a run of eight successive monthly falls, causing 10-year US Treasuries to pierce 3.6 per cent for the first time since April.
Last week also witnessed another familiar trend from recent weeks of lower oil, weaker credit spreads and lower equities, with the MSCI World Index of equities posting its worst weekly loss in six years.
This negative sentiment has led to reduced international new issue volumes for this traditionally busy week of the year. Investors demanding larger concessions over existing debt amidst concerns that slower growth will hurt company profits with the likelihood of a recession more evident.
Regional credit witnessed another rough ride with Government of Dubai five-year credit default swaps (CDS) spreads 60 basis points (bps) wider on the week at 265, a move that is largely unjustified in our opinion.
Dubai spreads have widened 140 bps since July and now look good value when compared to other five-year regional CDS pricing for Saudi Arabia (57) Abu Dhabi (73) Qatar (75) Kuwait (80) Oman (88) and Bahrain (140).
Lower pricing for dirham-denominated assets has also lead to some attractive yields being on offer for names such as Nakheel 2010's at 6.27 per cent, Jafza 2012's at 5.78 per cent, and Government of Dubai 2013's at 5.5 per cent.
The HSBC/DIFX Sukuk and Conventional indices (average spread versus libor) widened 14 and 10 bps to 306 and 302 respectively, to trade at all time wides.
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