GCC bond and sukuk issuance surged by $32 billion in the first quarter of 2019, lifting outstanding debt in the region to $478 billion, according to new research.
National Bank of Kuwait (NBK) said yields in the GCC trended lower, supported by rising oil prices which have benefitted fiscal consolidation efforts across the region.
It said a sharp rise in regional debt issuance, led by the sovereigns of Saudi Arabia, was driven by low borrowing costs, good credit ratings, and a strong appetite for regional bonds among international investors.
The report added that regional yields are expected to remain low, while issuance is forecast to increase on 2018’s levels.
NBK Group chief economist, Dr Saade Chami, said: “All GCC sovereigns now have stable outlooks and most have investment grade ratings. International demand for GCC sovereigns is expected to receive a large boost in 2019 as a result of inclusion of five GCC sovereigns in the JP Morgan Emerging Markets Bond Index (EMBI).
"The region could receive as much as $30 billion in fund inflows, with most being allocated to larger debt markets such as Saudi Arabia.”
The NBK report said that across the region, policy makers are establishing regulation to improve debt management and increase transparency, market access, and availability of timely information.
Last year the UAE set in place a new debt law and a debt management office, and in Saudi Arabia the local stock exchange, Tadawul, launched bond and sukuk trading.
“In the first quarter we saw significant developments including Aramco’s $12 billion debut bond. Issuance of bonds by GCC sovereigns and corporates is expected to grow in 2019, as a result of largely expansionary budgets and refinancing needs arising from maturing debt,” added Chami.
The report said global and regional yields continue to trend down in Q1, driven by expected global economic slowdown, dovish signals on monetary policy, low inflation, and a sharp recovery in oil prices from December 2018 lows.
Falls were led by Bahrain and Oman, despite continued pressure on fiscal positions. A fall in Bahrain sovereign yields was sparked by the provision of a $10 billion support package by neighbouring countries last year. Oman yields also fell sharply, supported by the promise of fiscal reforms including the introduction of VAT.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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