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Fri 2 Mar 2018 01:03 AM

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Dubai's credit risk falls to lowest level in more than decade

Emirate bounces back from 2009 when it struggled to repay billions of dollars in debt

Dubai's credit risk falls to lowest level in more than decade

The cost of ensuring Dubai’s bonds against default has fallen below 100 basis points for the first time in more than a decade.

That’s a milestone for the emirate that couldn’t repay billions of dollars of debt about 10 years ago after spending exorbitant amounts on acquisitions and construction projects.

Dubai’s credit default swaps were at almost 1,000 basis points in 2009, according to CMA prices compiled by Bloomberg.

But the days when Dubai made headlines because of its debt are over. And so, like other emerging-market peers, the securities have benefited from demand for yield, even though Dubai’s still burdened by borrowings that are bigger than its entire economy.

Another reason is that “there hasn’t been much supply of government bonds out of Dubai,” said Abdul Kadir Hussain, the head of fixed income at Dubai-based Arqaam Capital Ltd. The emirate hasn’t sold debt since 2016, according to data compiled by Bloomberg.

The decline in the emirate’s credit default swaps has reduced the difference between its contracts and those of Abu Dhabi, its larger and richer neighbor that bailed out Dubai, to 43 basis points, the narrowest on record.

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