Dubai
The cost of insuring risk or the Credit Default Swaps (CDS) on Qatar rose after Saudi Arabia and the UAE among others severed all diplomatic ties with Qatar.
The 5-year CDS for Qatar rose 18 per cent to be at 70 basis points from 59 basis points in the previous session.
“Markets are under pressure. This is across the whole curve. It is difficult to say what is going on behind the scenes now, so a lot of investors are selling now and asking questions later,” Doug Bitcon, Head of Credit Strategies, Rasmala Investment Bank told Gulf News.
The 5-year Saudi CDS also rose 4.1 per cent to 92.84 basis points from 89.158 in the previous session.
However, local CDS witnessed a slight fall.
Dubai CDS was 0.65 per cent lower at 105.12 basis points, while 5-year Abu Dhabi CDS was also down 0.15 per cent at 39.08 basis points.
“Qatar will see a big impact on CDS generally as more details emerge on more commercial restrictions. This impact would pan out in the next few days as more details emerge,” Nadi Bargouti, managing director head of asset management at Emirates Investment Bank said.
“At this time its justified speculation, once more details emerge and if it confirms everyone’s fears. We would start seeing an impact on CDS levels, and other indicators. So we will have to wait and see until then,” Bargouti said.
Meanwhile, according to reports, twelve-month forward contracts for the riyal jumped as much as 203 points to 405 points, the highest level in more than a year, indicating increased bets Qatar could devalue its currency. The contracts traded at 350, up 148 points on the day. The riyal is pegged at 3.64 per dollar.
