May 09 2012
|more articles from|
Scampering to find yield
Middle East Credit Commentary - April 2012
So what's the result? Everybody is scampering to find yield. With bank deposits yielding close to nil, fixed income as an asset class is still offering you the better alternative. At least until growth starts hitting international economies and equities start to look more appealing.
Comparing yields of regional bonds as of end of March 2012 and end of April 2012, you notice how the yield of almost all paper has dropped. Whether it is ADGB 6.75% 2019 yielding 2.99% now vs. 3.24% a month back or DUGB 6.7% 2015 yielding 4.32% now vs. 4.52% last month.
With all the bad news and bad economic figures that came out this month, one would assume April was a month of opportunities. A month where you would pick bonds from the lows. Alas, the only lows recorded were in the yields. It seems investors are less worried about the daily bad news that comes out of Europe or the Middle East (Syria, Iran, and Egypt) and rather would only react to a massive shock to the system. Perhaps some major bank defaulting or Israel actually launching an attack on Iran.
The new DUGB 6.45% 2022 that was recently issued was to many a bit expensive when compared to the existing curve. Very true in theory but market dynamics are very different from that fact! Two things should have been considered: that it's a sukuk and the other that funds from maturing sukuk (DIFC, Jafza) will need to be deployed. Doesn't take too much contemplation to figure that these bonds were a buy and hold. They are already 100.50 bid (100.00 reoffer) in the street or at 6.38% yield vs. the 6.45% yield it originally came at.
So will we see regional debt higher and tighter? If the above hasn't made you think twice, sell me your bonds!
Bassel Barbir is Senior Trader at the Fixed Income Desk of MENA Invest and can be contacted at firstname.lastname@example.org
© Zawya 2012
© Copyright Zawya. All Rights Reserved.