Anita Yadav - Head of Fixed Income Research
Published Date: 04 January 2018
Last month, the US Federal Reserve delivered its third rate hike of 2017, increasing the target rate range to 1.25% - 1.50%. Post the rate hike, supported by strong economic data and hawkish tone of Fed officials, yields on UST curve shifted upwards. However, insurance flows into the long end and muted inflation data kept yields on longer end of the curve a bit muted, thereby continuing the recent bear flattening trend of the UST curve.
In this environment, given the shorter average duration, the Emirates NBD Markit IBoxx USD Sukuk index, fell nearly 2% in the last quarter from an yearly high of 99.06 in early September 2017 to 96.99 as at today. That said, total return on the index has remained positive as a result of coupon collection and closed at 118.19 in December 2017 compared with its level of 113.08 as at the beginning of 2017.
Looking at current yields we make following relative value observations:
Source: Emirates NBD Research
Explaining Rising UST Yields
Relative Value in Sukuk : May 2018
Bahrain Debt Update
Relative Value in Sukuk as at April 2018