x Abu Dhabi, UAEFriday 21 July 2017

Qatar sells bonds and sukuk to help banks meet Basel III requirements

Qatar's central bank sold 4 billion Qatari riyals of bonds and sukuk yesterday in an attempt to help its banks to meet international funding requirements.

Qatar's central bank sold 4 billion Qatari riyals (Dh4.03bn) of bonds and sukuk yesterday in an attempt to help its banks to meet international funding requirements.

It is hoped that the sale will also help to develop a yield curve, allowing Qatari companies to borrow at a lower cost.

"The aim of issuing these bonds is to develop monetary policy and the implementation of a mechanism of coordination between monetary and fiscal policy and support the strength of the banking system and financial and market tools," the bank told Reuters.

The sale comprised 3bn riyals of conventional bonds and 1bn of sukuk, and followed a 4bn riyal sale of treasury bills last Tuesday, all of which mature before the end of the year.

Last year was a record year for bond and sukuk sales in the Arabian Gulf, with Qatar leading the region in debt sales as buyers sought safe havens.

Because of the Qatari government's financial strength, its low-yielding bonds currently offer little allure to investors who are currently scouring the world for returns above inflation.

Bond yields move in the opposite direction from prices.

A jump in inflation for January to 3.4 per cent year-on-year resulted in Qatar's current borrowing rates for almost all of its medium to long-term debt stock yielding negative interest rates in real terms.

Yields on Qatar's 10-year government debts rose 2 basis points to 2.8918 per cent on Friday, the biggest jump since January. This effectively means that domestic Qatari bondholders are paying the country's government to be able to lend it money.

However, accelerating credit growth and an increase in house prices over the past few months could mean further difficulties for Qatar's central bank in containing price rises, according to a research note from HSBC.

 

ghunter@thenational.ae