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Anita Yadav - Head of Fixed Income Research
Published Date: 03 February 2019
Last year was challenging for most asset classes and GCC bonds were no exception. Rising US interest rates and receding dollar liquidity drained investor appetite for emerging market assets and affected the bid for USD denominated bonds from the GCC region negatively. That said, with average yield above 4.5%, coupon collection helped GCC bonds to avoid losses. Total return on Barclays Bloomberg GCC bond index was a mild gain of 0.18%. This compares favourably with loss of -2.5% on the wider EM USD bond index and 0.2% loss on the US aggregate bond index.
Looking ahead, we expect US rate hikes to slow or pause in 2019. Assuming that oil prices remain in the $60-$80 /b range, total return on GCC bonds is expected to remain positive in 2019 albeit in a very low single digit percentage.
The factors affecting performance of GCC bonds in 2019 will be:
Source: Bloomberg, Emirates NBD Research
Performance of GCC bonds and sukuk in 2018
Global Sukuk: Relative Value
From LIBOR to SOFR