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Anita Yadav - Head of Fixed Income Research
Published Date: 05 February 2019
January was a constructive month for GCC bonds and sukuk. While economic data in the US remained firm, downward revision to global growth and ongoing trade tensions seemed to have made the US Federal Reserve more cautious on the interest rate outlook in the US. The Fed appears willing to be more patient on rate hikes in 2019. Dovish tone of the FOMC January meeting cemented the market expectation of slower rate hikes which in turn shifted the UST benchmark yield curve lower. Yields on 2yr, 5yr and 10yrs US treasuries closed the month of January at 2.46% (-3bps, m/m), 2.44% (-7bps, m/m) and 2.63% (-5bps, m/m).
The total return on Emirates NBD Markit iBoxx USD Sukuk index in January was a gain of +1.64% which compares very favourably with full year total return in 2018 of only 0.26%.
Looking at trading yields on various sukuk at the end of the month of January, following relative value observations are made:
Source: Markit, Emirates NBD Research
Performance of GCC bonds and sukuk in 2018
Global Sukuk: Relative Value
From LIBOR to SOFR