Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Gulf debt market weakens as rift with Qatar worries foreign investors

EconomyJun 06, 2017 08:30AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. Traders monitor screens displaying stock information at Qatar Stock Exchange in Doha

By Davide Barbuscia

DUBAI (Reuters) - Bond prices across Gulf Arab nations weakened on Tuesday as foreign investors hesitated to buy, concerned that the diplomatic crisis surrounding Qatar would increase risks around the region.

Qatar's sovereign international bonds came under pressure, with its longest-dated paper – a bond maturing in 2046 <74727PAV3=> – registering the largest losses. It is now down by more than 2 cents on the dollar since the end of last week.

But bond prices fell moderately across the six-nation Gulf Cooperation Council, said a Dubai-based portfolio manager, after Saudi Arabia, Egypt, the United Arab Emirates and Bahrain severed diplomatic and transport ties with Doha early on Monday, accusing it of supporting terrorism.

The GCC debt market has seen a surge in foreign investment over the past year because of a surge in issuance by governments, which has improved liquidity and created a benchmark yield curve.

But the Qatari crisis, the most serious threat to the existence of the GCC in years, has made some foreign institutions more cautious about the region in general, at least until they see whether the dispute can be resolved without any further escalation, fund managers said.

Also, the Saudi Arabian, UAE and Bahraini central banks have not yet clarified how they want commercial banks in their countries to handle business ties with Qatar, which involve substantial cross-border lending, deposits and syndicated loans.

If the commercial banks are advised to get rid of their Qatari assets in a short timeframe, or if authorities act against Qatari banking assets in their jurisdictions, that could provoke retaliation by Doha and turmoil in the Gulf banking and money markets.

"There hasn't been a panic sell-off so far and the market is still seeing a two-way flow skewed toward better sellers," said Zeina Rizq, director of fixed income asset management at Arqaam Capital in Dubai.

"But things could change pretty drastically if the situation escalates or if the regional central banks ask commercial banks to sell their Qatari paper.”

A senior banker at a foreign bank in Dubai said banks in the UAE had not yet been informed by the UAE central bank about what would happen to their branches and operations in Qatar.

"Will a UAE bank lend to a Qatari bank that operates in Dubai or Abu Dhabi, or will it be switched out of the system? There is absolutely no clarity on this. Is this just cutting off diplomatic ties, or leading to economic sanctions against Qatari banks and companies?”

Selling of GCC sovereign and corporate bonds was particularly strong on Tuesday at the long end of the yield curve, where more international investors are involved.

Saudi Arabia’s bonds maturing in 2046 have lost a little more than 0.5 cent on the dollar since last week. Its 10-year bonds due in 2026 have dropped almost as much.

Oman’s 2047 bonds were also weaker on Tuesday, down by a little more than 1 cent since last week.

"If tensions remain high, the Qatar sovereign is likely to underperform its GCC peers, with the 30-year part of the curve impacted the most due to its high international ownership,” Standard Chartered said in a research report.

Qatar Islamic Bank's (QA:QISB) latest $750 million sukuk issue has now dropped by about 2-1/2 cents, while Qatari property developer Ezdan Holding's (QA:ERES) 2022 sukuk issue has sunk 4.5 cents to a bid price of 95.7 cents, according to Tradeweb data.

Some further downward pressure was caused by news that many UAE banks have stopped providing leverage to their clients to buy Qatari bonds, said Rizk. This means high net worth buyers could vanish from the market, banking sources told Reuters.

Gulf debt market weakens as rift with Qatar worries foreign investors

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Amir Abol
Amir Abol Jun 06, 2017 10:39AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I just amazed the writer doesn't have enough knowledge about name of the Persian gulf he just made it name up.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email