Bahrain bond 'signals renewed confidence in Gulf'

Bahrain’s launch of a $750m benchmark sukuk bond was a further sign of a marked return of investor confidence in the Gulf, according to a research note by Standard Chartered Bank released on Thursday.

It follows a flurry of Islamic bond launches over recent months, which would help regional governments fund their economic diversification ambitions, as well as contribute to a much needed deepening of the debt capital markets and the gradual building of a yield curve, the note said.

The amount of Bahrain’s bond was 50 percent higher than what could be expected from earlier government announcements, according to the note.

The kingdom announced on Wednesday the issuance of the bond with a five year maturity at 340 basis points (bps) over US Treasuries.

Governments were able to tap the bond market at levels that were “unthinkable” until recently due to a narrowing of their credit default swap (CDS) spreads.

Dubai’s current CDS spread of 510bps was half its February level, while Abu Dhabi’s CDS spread stood at 250 bps, it said.

Subscription to Abu Dhabi’s issuance in April of $3bn of bonds with a four percent coupon on a five year tenor was a huge success, while Qatar’s issuance of a similar $3bn bond was also well received, the according to the bank.

“This return of investor confidence in the region coupled with a growing risk appetite from offshore investors has helped strengthen the regional bond markets which have seen a flurry of bond issuance both in the sovereigns and corporate space,” it said.

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