By Dr R Seetharaman
The global bond issues were more than $2.28tn this year with major issues coming from European Investment bank — $50.48bn and the federal bank of Germany — $43.33bn. In the first half of 2015, it was more than $1.626bn and in 2015 it was $3.741tn.
The yields on US government bonds touched new lows on Friday, the latest records set during this year’s rally in sovereign debt, as investors continue to grapple with slow global growth, ultra-loose central bank policies and the aftershocks of the UK’s vote to leave the European Union. It ended last week at 1.44%.
The benchmark 10-year (Japanese government bond) JGB yield dropped to a record low of minus 0.260% last week and ended last week at (-) 0.253%. Ultra-long JGB yields sank to record lows this week after Britain voted to exit the European Union, in a fresh blow to the Bank of Japan’s efforts to beat deflation.
The UK 10-year yield end last week at 0.863%. Against a backdrop of UK political turmoil and with economists expecting a recession in the coming months, the 10-year gilt yield fell when Bank of England governor Mark Carney said last week the central bank would probably need to pump more stimulus into Britain’s economy over the summer after the shock of last week’s decision by voters to leave the European Union.
The German 10-year yield was at (-) 0.126% and fell below zero after the Brexit vote.
The global Islamic bond issues was more than $23bn this year. The major bond issues include Republic of Malaysia — $2.76bn, Islamic Development Bank — $2.56bn and Federal of Malaysia — $1.5bn. In the first half of 2015, it was more than $15bn and in the entire 2015, it was more than $35bn.
A combination of lower growth, higher debt levels and smaller domestic and external buffers leave the Saudi Arabia less well-positioned to weather future shocks. The Abu Dhabi government’s sizeable fiscal buffers will help the UAE government cope with the challenges from the ongoing economic slowdown and allow it time to adjust its fiscal policy to lower oil prices.
The impact of low oil prices on Qatar’s government balance sheet and on its external balance sheet seem to be manageable. The sharp decline in oil prices, fiscal consolidation efforts and upcoming refinancing needs are expected to keep commercial debt issuance in the GCC. The sizeable fiscal assets accumulated by Abu Dhabi, Kuwait, Qatar, and Saudi Arabia have provided them with the option to either issue debt or liquidate some of these assets.
In 2016, GCC bond issues were more than $35bn. The GCC sukuk was more than $7.1bn and GCC conventional bonds were more than $28.3bn. The major sukuk issues in 2016 are from DP World — $1.2bn, Investment Corporation of Dubai — $750mn, the emirate of Dubai — $569mn and the emirate of Sharjah — $500mn. The major GCC Conventional bond issues in 2016 are from the emirate of Abu Dhabi — $5bn, QNB — $2.58bn and the Kingdom of Bahrain — $600mn.
The GCC Sovereign bond issues were active during this year and exceeded $18bn, which include Qatar — $9bn, the emirate of Abu Dhabi — $5bn and Oman — $3bn.
The GCC Bond issues exceeded $58bn in 2015. In the first half of this year, GCC syndicated loans were more than $70bn, unlike in the previous year — more than $48.8bn.
This year the major syndicated loans were raised by the Kingdom of Saudi Arabia — $10bn and Equate Petrochemical — $5bn.
The Qatar 5-year CDS is at 107 basis points, Saudi 5-year CDS is at 170 basis points, Dubai 5-year CDS is at 175.49 basis points, Abu Dhabi 5-year CDS is at 85 basis points and Bahrain 5-year CDS is at 390.095 basis points.
* Dr R Seetharaman is Group CEO of Doha Bank.
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