A chorus of voices has recently become increasingly loud, signing from the same hymn sheet of 'It's all over for bonds'. The lyrics are seductive, the tempo attractive, but there is something definitely out of tune with the story.
The bond market is a function of two key variables that drive most of the returns - the risk free yield curve and the credit spread.
For our market, the risk free curve is deemed to be the US Treasury curve. Purists may argue that the US curve is no longer risk free with the US having lost its coveted 'triple A' moniker last year, but the fact is that US dollar credit is priced off the US curve and there is no credible alternative. Every time MENA-based entities issue in US dollars, the market will price off the US dollar curve.