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Anita Yadav - Head of Fixed Income Research
Published Date: 26 June 2018
Bahrain’s five-year credit default swaps touched 609bps yesterday, its highest level on record post the financial crisis. While 5yr CDS spreads climbed more than 170bps in the last two trading sessions alone, yield on cash bonds also widened materially. Z-spread on BHRAIN 20s has increased 87bps to 609bps and that on BHRAIN 24s sukuk increased 92bps to 496bps in the last few days.
Excluding the ongoing fiscal budget deficits, Bahrain will need circa $10 billion over the next two years for debt servicing and repayment alone ($1.8 bn in interest expense and $8 bn in principal repayment). Bahrain’s refinance risk is high in the current environment of investors’ scepticism, thereby causing its credit curve to invert somewhat. Z-spread on BHRAIN 44s is currently lower at 603bps vs 692bps on BHRAIN 29s.
The current sell off has no material trigger and not much has changed about Bahrain’s economic fundamentals in the last few weeks. In fact oil prices are significantly higher than the assumption of $55 / b which Bahrain used for its 2018 budget.
Attached is our report done few weeks ago, detailing Bahrain’s financials and credit profile.
Source: Bloomberg, Emirates NBD Research
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Global equities closed marginally higher