x Abu Dhabi, UAETuesday 16 January 2018

Regional bonds lower

Bahrain's bonds plummet and the cost of insuring against a government default rise as protests continue in the island nation.

Protests in the region have sent the price of some government bonds in the Gulf downward and raised the cost of insuring against government debt default.

Bahraini government bonds maturing in 2020 fell to 94.17 US cents on the dollar in trading yesterday, a drop of 5.3 per cent since February 2.

The fall in bond prices and rise in yields was expected as protesters crowded the main square in the Bahraini capital, Manama, for a second day.

As bonds fell, the cost of protecting against default on Bahraini debt has risen sharply in recent days.

Credit default swaps, a form of debt insurance, rose to 263.65 basis points on Tuesday, according to Bloomberg News.

Bahrain's default swaps have risen by 48 per cent since January 25.

The effect has been more muted on other Gulf countries' bonds and credit default swaps.

Abu Dhabi Government bonds have fallen slightly since the beginning of the month, reflecting investor skittishness.

Qatari bonds maturing in 2020 have also fallen slightly in recent weeks.

Credit default swaps on Dubai and Qatari government debt have risen over the past week, according to figures from Bloomberg News.

Those swaps, however, have moved erratically recently, and it is not clear that the unrest in Bahrain and elsewhere in the region is directly responsible for the modest rises of recent days.

Dubai's default swaps rose from 402.602 basis points last Thursday to 412.187 on Tuesday, according to Bloomberg News.

Qatar's rose from 96.35 on February 9 to 99.145 on Tuesday.

Sheikh Mohammed bin Essa Al Khalifa, the chief executive of Bahrain's Economic Development Board, told Bloomberg News on Saturday in New York that Bahrain's Islamic bonds would recover from an extended slump and bring yields back down.