gcc bond chart book - adcb personal banking · 2019-04-23 · gcc bond markets –key takeaways...
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GCC Bond Chart BookA comprehensive overview of the risk and return parameters of the key securities in the GCC Fixed Income space
Prerana Seth
Luciano Jannelli
Kishore Muktinutalapati
Mohammed Al Hemeiri
Noor Alameri
1Q 2019
GCC Bond Markets – Key Takeaways
This GCC Bond Chart Book provides a comprehensive overview of the bond market performance in 1Q 2019 (Chapter
I), the trends in GCC dollar bond issuances (Chapter II) and finally the bond valuations compared mostly with other
emerging market peers (Chapter III and Chapter IV).
Global fixed income markets kick-started the year on a positive note with more dovish tones coming from the G3
central banks. Emerging market bonds have mostly recouped their losses of 2018. In line with the trend seen in
emerging market bond markets, GCC sovereign dollar bonds (except Oman) have also posted positive returns in 1Q
2019 (Page 5). Similarly, GCC corporate credits have also performed well, in line with trend seen in the corporate bond
markets of other EM regions (Page 8) and also amidst the decline in oil prices. The upward tick in oil prices has also
been a positive factor for the GCC bond market spreads.
In terms of bond market issuances, Saudi and Qatar continue to dominate the sovereign bond issuances (Page 14).
With the two countries having raised borrowings in 1Q19, total GCC sovereign dollar bond issuance has already
reached more than 50% of last year’s overall bond issuance. Pick-up in sovereign bond issuance is not surprising
considering majority of the GCC countries have moved to an expansionary fiscal policy to boost growth (Page 11). We
expect the demand to be easily absorbed with the phase-wise inclusion of GCC bonds in JP Morgan’s Emerging
Market Bond Index attracting sizeable inflows (Page 16 and 17). On the other hand, corporate bond issuance was
subdued in 1Q19 amidst global market uncertainty, with bulk of issuance coming from financial Institutions (Page 15).
However, corporate bond issuance is likely to pick up in the remainder of the year as narrower spreads and lower
yields should provide an opportunity for bond issuers to raise borrowing at lower rates.
We moved to a tactical overweight stance on emerging markets in March, within which our key preference remains for
GCC bond markets. Our key takeaway is – GCC markets will remain relatively resilient, even during periods of higher
volatility due to their low correlation characteristics. In addition, when comparing GCC sovereign bond market prices
with global sovereign bond market prices we can see that - for each credit class - GCC bonds still appear to be
cheaper (Page 27-29). We have, however, reduced our preference for Oman bonds on concerns of mounting fiscal
risks and now particularly favor high-quality GCC sovereigns.
2
Index
Chapter I: GCC bond performance in 1Q19
Chapter II: Primary market bond issuances in
GCC
Chapter III: Credit rating valuation
Chapter IV: GCC valuation analysis
3
Chapter I: GCC bond market
performance in 1Q19
GCC countries: US dollar bond performance
versus EM indices
5
Source: Bloomberg, Barclays indices, ADCB
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Bahrain SaudiArabia
UAE Kuwait Qatar
% r
etu
rn
1Q 2019
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
EM EMLATAM
EMEMEA
EMAsia
% r
etu
rn
GCC Sovereign: 10-year dollar bond yield
performance
6
Source: Bloomberg, ADCB
2.8
3.3
3.8
4.3
4.8
5.3
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19
10
-yea
r b
on
d y
ield
(%
)
Better quality GCC sovereigns yields have declined in line with EM peers
Mexico Qatar Saudi Arabia Abu Dhabi
South Korea Indonesia Dubai Kuwait
3.75
4.75
5.75
6.75
7.75
8.75
9.75
10.75
11.75
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19
10
-yea
r b
on
d y
ield
(%
)
Bahrain has outperformed its EM peers
Brazil BahrainOman Argentina
GCC Sovereign: 30-year dollar bond yield
performance
7
Source: Bloomberg, ADCB
3
3.5
4
4.5
5
5.5
6
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19
30
-ye
ar b
on
d y
ield
(%
)
Dubai is trading at attractive levels versus its EM peers
Mexico Qatar Saudi Arabia Abu Dhabi
South Korea Indonesia Dubai
5
6
7
8
9
10
11
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19
30
-yea
r b
on
d y
ield
(%
)
Bahrain has outperformed its EM peers
Turkey Bahrain Oman Argentina Brazil
GCC corporate bond performance
8
Source: Credit Suisse Indices, Bloomberg Barclays Indices, Bloomberg, ADCB
150
200
250
300
350
400
450
500
550
600
Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19
Spre
ad (
bp
)
EM middle east has performed well relative to its peers
EM Middle East Corp. Bond IndexEM Asia Corp. Bond IndexEM East. Europe Corp. Bond IndexEM EMEA Corp. Bond Index
20
30
40
50
60
70
80
90
100
110
120
125
130
135
140
145
150
155
160
165
Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
USD
/bb
l
GCC credit has positively reacted to the upward move in oil prices
GCC credit index (LHS) Brent Crude (RHS)
GCC CDS performance versus EM
9
Source: Bloomberg, ADCB
-100 -50 0 50 100
EgyptColombiaMalaysia
BahrainIndonesia
MexicoPhilippines
BrazilPeruIndia
South AfricaSaudi Arabia
RussiaChile
ChinaArgentina
QatarHungary
South KoreaAbu Dhabi
OmanThailand
KuwaitPolandCzechDubai
RomaniaTurkey
Bahrain CDS spreads have tightened the most
1Q 19 change in 5-year CDS
70
90
110
130
150
170
190
210
Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19
CD
S sp
read
(In
dex
ed a
t Ja
n 2
01
8=1
00
)
CDS spreads have tightened in line with EM
Bahrain Dubai Saudi Arabia Kuwait
Abu Dhabi Oman EM average
Chapter II: Primary market bond
issuances in GCC
11
GCC economies to expand fiscal budgets in 2019
-25
-15
-5
5
15
25
35
45
2008 2010 2012 2014 2016 2018
Fisc
al b
alan
ce (
% o
f G
DP
)
..will need to raise borrowing to fund their fiscal deficits
Bahrain Kuwait OmanQatar Saudi Arabia UAE
-40
-20
0
20
40
60
2008 2010 2012 2014 2016 2018
Cu
rren
t A
cco
un
t B
alan
ce (
% o
f G
DP
)
Bahrain and Oman have weak external balances..
Bahrain Kuwait Oman
Qatar Saudi Arabia UAE
Source: IMF, ADCB
12
Reduced dependency on oil
Source: IIF, Bloomberg, ADCB
SaudiKuwait
UAEQatar
Oman Bahrain
30%
40%
50%
60%
70%
80%
90%
40 60 80 100 120
oil
reve
nu
e (%
of
tota
l rev
enu
e)
2018 budget break-even oil price
Dependency on Oil revenue
0
20
40
60
80
100
120
140
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Oil
bre
akev
en (
USD
/bb
l)
Oil breakevens have declined
Saudi Kuwait UAE Qatar Oman Bahrain
13
More diversification needed
Source: IIF, ADCB
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Bahrain Oman Saudi Arabia Kuwait UAE Qatar
Oil
reve
nu
e (%
of
tota
l rev
enu
e)
2013 2014 2015 2016 2017 2018f 2019f
Sovereign dollar bond issuance seen
increasing this year
14
Source: Bloomberg, ADCBNote: 2019* data is from 31st Dec 2018 to 31st March 2019
4 3 3 3
40
50
37
20
0
10
20
30
40
50
60
2012 2013 2014 2015 2016 2017 2018 2019*
USD
bn
Sovereign dollar bond issuance in 2019 so far, more than half of 2018
GCC sovereign dollar bond issuance (USD bn)
0 10 20 30 40 50 60
2017
2018
2019*
USDbn
Bulk of issuance in 2019 from Qatar and Saudi Arabia
UAE Bahrain Kuwait Oman Qatar Saudi Arabia
Corporate dollar bond issuance has been
subdued so far..but likely to pick up
15
Source: Bloomberg, ADCBNote: 2019* data is from 31st Dec 2018 to 31st March 2019
9
1922
14
24
31
42
11
0
5
10
15
20
25
30
35
40
45
2012 2013 2014 2015 2016 2017 2018 2019*
USD
bn
Corporate dollar bond issuance has been subdued so far
0
5
10
15
20
25
30
35
40
2017 2018 2019*
USD
bn
Financials and agencies again dominate issuances in 1Q19
Agency Financials Industrial Real Estate Utility
16
Inclusion in JP Morgan bond index to absorb demand
Source: Bloomberg, ADCB
• Sovereign and quasi-sovereign debt issuers
from Saudi Arabia, Qatar, UAE, Bahrain and
Kuwait eligible to be included in the EMBI
Global Diversified (EMBIGD), EMBI Global
(EMBIG) and EURO-EMBIG indices
• Entry is being phased over nine months
from January 2019 (31st Jan 2019– 30th Sep
2019)
• Both conventional bonds and sukuk to be
included. For the sukuk to be included, a
credit rating from at least one of the three
major rating agencies is mandatory
• With the inclusion, GCC countries will
represent 11.2% of the JP Morgan's EMBI
Global Diversified and EMBI Global series
• The GCC weighting will gradually increase to
17% of the overall index
• The inclusion is likely to attract sizeable
fund inflows (USD30-40bn), leading to tighter
spreads
3.1
2.72.6
2.10.8
Potential weight in the EMBI global diversified index (%)
Saudi Arabia Qatar UAE Bahrain Kuwait
Improve liquidity
VisibilityLower cost of funding
17
Scope for more inflows due to index inclusion
Source: HSBC, ADCB
0
0.1
0.2
0.3
0.4
0.5
0.6
0
100
200
300
400
500
600
Sau
di
Ven
ezu
ala
Equ
ado
r
Nig
eria
UA
E
Uru
guay
Arg
enti
na
Leb
ano
n
Ch
ina
Mal
aysi
a
pp
t
USD
m
Top 10 biggest increase in allocations (As of Jan'19)
Net inflows (LHS) Change in weighting (RHS)
0
0.5
1
1.5
2
2.5
3
3.5
Saudi Qatar UAE Bahrain Kuwait
Scope for more inflows into GCC bonds
Benchmark Current fund weight (Jan'19)
Saudi’s first dollar bond sale of 2019 was a
success
18Note: “T” refers to similar-maturity treasuries Source: Bloomberg, ADCB
7.5
27
0
10
20
30
40
USD
bn
Strong demand at 1st bond sale of 2019
Issue size Total bids
4
3.5
Issue size (bn)
10y 30y
T+175
T+230
T+200
T+250
130
150
170
190
210
230
250
270
10y 30y
Saudi USD7.5bn bond sale
Final Pricing Initial Pricing
0%
20%
40%
60%
80%
Fundmanagers
Banks Central banks Insurance &pension funds
% o
f th
e p
rim
ary
issu
ance
Subscribers' share of total issuance
10y 30y
0%
10%
20%
30%
40%
50%
US Europe Asia Middleeast
UK% o
f th
e p
rim
ary
issu
ance
Subscribers' nationality as a share of total issuance
10y 30y
Major corporate dollar bond deals of 1Q 2019
19
Note: Deals of only amount issued greater than USD500m are shortlisted, *Priced at issue indicated as spread over Treasury (T) or as mid-swap spread (M) , Bloomberg sector classification has been used, ^Issuer rating used where applicable, **Rating equivalent to Fitch ratingSource: Bloomberg
Corporate IssuerBloomberg Ticker Sector Country
Amount Issued Coupon Maturity
Maturity Type Issue Date
Moody Rtg^
Priced at issue (spread, bp)*
QNB Finance Ltd QNBK Agency QA 1000 3.50 3/28/2024 AT MATURITY 3/28/2019 Aa3 T+135.5
Emirates NBD PJSC EBIUH Agency AE 1000 6.13 - PERP/CALL 3/20/2019 A3 T+366
Fab Sukuk Co Ltd FABUH Agency AE 1000 3.88 1/22/2024 AT MATURITY 1/22/2019 Aa3 M+130
QIB Sukuk Ltd QIBKQDFinancial
Institutions QA 750 3.98 3/26/2024 AT MATURITY 3/26/2019 A M+150
DIB Tier 1 Sukuk 3 Ltd DIBUHFinancial
Institutions AE 750 6.25 - PERP/CALL 1/22/2019 - T+366
Emirates Development Bank PJSC EMDEBK Agency AE 750 3.52 3/6/2024 AT MATURITY 3/6/2019 Aa3** M+98
Mumtalakat Sukuk Holding Co MUMTAK Agency BH 600 5.63 2/27/2024 AT MATURITY 2/27/2019 Ba3** T+316
Almarai Sukuk Ltd ALMARA Industrial SA 500 4.31 3/5/2024 AT MATURITY 3/5/2019 Baa3 M+180
QIIB Senior Sukuk Ltd QIIKQDFinancial
Institutions QA 500 4.26 3/5/2024 AT MATURITY 3/5/2019 A2 M+175
Mashreqbank PSC MASQUHFinancial
Institutions AE 500 4.25 2/26/2024 AT MATURITY 2/26/2019 Baa1 M+175
QNB Finance Ltd QNBK Agency QA 500 0.00 3/12/2024 AT MATURITY 3/12/2019 Aa3 -
20
Abu Dhabi Sovereign Dollar Debt Maturity Profile
Source: Bloomberg, ADCB
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
20
36
20
37
20
38
20
39
20
40
20
41
20
42
20
43
20
44
20
45
20
46
20
47
USD
bn
Principal Interest
21
Dubai Sovereign Dollar Debt Maturity Profile
Source: Bloomberg, ADCB
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
20
36
20
37
20
38
20
39
20
40
20
41
20
42
20
43
USD
bn
Principal Interest
22
Saudi Arabia Sovereign Dollar Debt Maturity Profile
Source: Bloomberg, ADCB
0
1
2
3
4
5
6
7
82
01
92
02
02
02
12
02
22
02
32
02
42
02
52
02
62
02
72
02
82
02
92
03
02
03
12
03
22
03
32
03
42
03
52
03
62
03
72
03
82
03
92
04
02
04
12
04
22
04
32
04
42
04
52
04
62
04
72
04
82
04
92
05
0
USD
bn
Principal Interest
23
Kuwait Sovereign Dollar Debt Maturity Profile
Source: Bloomberg, ADCB
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2019 2020 2021 2022 2023 2024 2025 2026 2027
USD
bn
Principal Interest
24
Bahrain Sovereign Dollar Debt Maturity Profile
Source: Bloomberg, ADCB
0
0.5
1
1.5
2
2.52
01
92
02
02
02
12
02
22
02
32
02
42
02
52
02
62
02
72
02
82
02
92
03
02
03
12
03
22
03
32
03
42
03
52
03
62
03
72
03
82
03
92
04
02
04
12
04
22
04
32
04
42
04
52
04
62
04
7
USD
bn
Principal Interest
25
Oman Sovereign Dollar Debt Maturity Profile
Source: Bloomberg, ADCB
0
0.5
1
1.5
2
2.5
3
3.5
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
20
36
20
37
20
38
20
39
20
40
20
41
20
42
20
43
20
44
20
45
20
46
20
47
20
48
USD
bn
Principal Interest
Chapter III: Credit rating
valuation
GCC sovereigns vs EM peers- 10yr segment
27
Note: The ratings refer to Fitch ratings, * DEWA credit rating used as a proxy for Dubai credit rating Source: Bloomberg, ADCB
AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B
Brazil
Colombia
Mexico
Chile Peru
Turkey
Russia
South Africa
QatarSaudi Arabia
Abu Dhabi
Bahrain
Kuwait
China
Indonesia
Philippines
Oman
Argentina
Egypt
Dubai*
3
4
5
6
7
8
9
10
11
12
10
-yea
r yi
eld
s
GCC sovereigns trading cheap versus peers
GCC vs EM peers- 30yr segment
28
Note: The ratings refer to Fitch ratings, * DEWA credit rating used as a proxy for Dubai credit rating Source: Bloomberg, ADCB
AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B
BrazilMexico
Chile Peru
Turkey
Russia
South Africa
QatarSaudi Arabia
Abu Dhabi
Bahrain
Romania
South Korea
Indonesia
Oman
Argentina
Egypt
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
30
-yea
r yi
eld
s
GCC sovereigns appear cheap versus other EM
GCC CDS versus ratings
29
Note: The ratings refer to Fitch ratings, * DEWA credit rating used as a proxy for Dubai credit rating Source: Bloomberg, ADCB
AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB-
Brazil
ColombiaMexico
ChilePeru
Turkey
Russia
South Africa
QatarSaudi Arabia
Dubai*
HungaryAbu Dhabi
Poland
Bahrain
Romania
Czech
Kuwait
South Korea
China
IndonesiaIndia
Malaysia
PhilippinesThailandUK
Spain
Italy
France
AustriaBelgium
Oman
0
50
100
150
200
250
300
350
400
450
CD
S sp
read
s (b
p)
GCC bond markets attractive versus its EM peers
GCC Financials credit rating
30
Note: The ratings refer to Fitch ratings, *S&P rating used as substitute where the corporate/bank not rated by Fitch ratings Source: Bloomberg, ADCB
FAB
HSB
C M
EN
BK
AD
CB
AD
IBEm
irat
es Is
lam
ic B
ank
Emir
ates
NB
DU
NB
CB
KG
ulf
Ban
kA
l Ah
li B
ank
of
Kuw
ait
Al A
hli
Un
ited
ban
kB
urg
an B
ank
Kuw
ait
Inte
rnat
ion
al B
ank
Kuw
ait
Fin
ance
Ho
use
Bo
ub
yan
Ban
kW
arb
a B
ank
Qat
ar N
atio
nal
Ban
kD
ub
ai Is
lam
ic B
ank
Mas
hre
qA
hli
Ban
k Q
SCQ
atar
Isla
mic
Ban
kD
OH
A B
AN
KA
l Kh
aliji
BA
NK
CB
DN
oo
r B
ank
Al-
Bila
d*
RA
KB
AN
kN
BF
Shar
jah
Isla
mic
Ban
kN
atio
nal
Co
mm
erci
al B
ank
Ban
qu
e Sa
ud
i Fra
nsi
Riy
ad B
ank
Sam
ba
Fin
anci
al g
rou
pA
l Raj
hi B
ank
Ara
b n
atio
nal
ban
kA
hli
Un
ited
Ban
kG
ulf
Intl
Ban
kA
linm
a B
ank
Sau
di H
olla
nd
iB
ank
AlJ
azir
aSa
ud
i In
vest
men
t B
ank
Un
ited
Ara
b b
ank
Sau
di B
riti
sh B
ank
Ban
k M
usc
atN
BO
Ban
k D
ho
far
Ban
k So
har
SO
AG
NB
BO
man
Ara
b B
ank*
Ban
k N
izw
a*B
ahra
in Is
lam
ic B
ank
GCC Financials
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
GCC corporates credit rating
31
Note: The ratings refer to S&P ratings, ** Fitch ratings used as substitute where the corporate/bank not rated by S&P ratings, ^ refers to Moody’s ratingsSource: Bloomberg, ADCB
Mu
bad
ala
IPIC
Etis
alat
Qat
ari D
iar
Qat
ari P
etro
leu
m
Do
lph
in e
ner
gy**
Nak
ilat
RA
SGA
S
Etih
ad**
Oo
red
oo SE
CO
SAB
IC
Sau
di T
ele
com
TAQ
A**
DEW
A
DP
Wo
rld
**
Jafz
**
MA
F
Ald
ar^
DIF
C
Kuw
ait
pro
ject
s C
o
Emaa
r
OM
GR
ID*
*
Dam
ac
Ezd
an H
old
ing
Bat
elco
Top
az w
orl
d**
Kuw
ait
ener
gy
GCC Corporates
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
Chapter IV: GCC valuation
analysis
GCC sovereign dollar yield curves
33Source: Bloomberg, ADCBNote: S refers to Sukuk
BHRAIN 6.125 7/22 BHRAIN 5.624 2/24 S
BHRAIN 6.75 9/29
BHRAIN 7.5 9/47
OMAN 3.875 3/22OMAN 4.125 1/23
OMAN 5.625 1/28
OMAN 6.75 1/48
4
5
6
7
8
3yr 5yr 10yr 30yr
ADGB 2.5 10/22 ADGB 3.125 5/26
ADGB 3.125 10/27
ADGB 4.125 10/47
DUGB 6.45 05/22
DUGB 3.89 03/25
DUGB 5 04/29
DUGB 5.25 1/43
KSA 2.894 4/22
KSA 4 04/25
KSA 4.303 01/29
KSA 5 4/49
QATAR 4.50 1/22QATAR 3.375 03/14/2024
QATAR 4 03/14/2029
QATAR 4.817 03/14/2049
KUWIB 2.75 3/22
KUWIB 3.5 3/27
2
2.5
3
3.5
4
4.5
5
5.5
6
3yr 5yr 10yr 30yr
Abu Dhabi z-spread and yield curve (YTD
change)
34Note: YTD change: 31st December2018 to 31st March 2019, , Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium. Note that the recent general upward shift in the yield curve indicates that bonds have sold off across all maturities. Thus yield curve analysis allows us to see which maturities have suffered more and which have suffered less.
0
50
100
150
200
250
300
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
DUGB7.75
10/20
DUGB5.59 6/21
DUGB6.45
05/22
DUGB3.87501/23
DUGB3.89
03/25
DUGB 504/29
DUGB5.25 1/43
Z-sp
read
(b
ps)
Yiel
d
31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread)
Dubai z-spread and yield curve (YTD
change)
35: Note: YTD change: 31st December2018 to 31st March 2019, , Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium. Note that the recent general upward shift in the yield curve indicates that bonds have sold off across all maturities. Thus yield curve analysis allows us to see which maturities have suffered more and which have suffered less.
0
50
100
150
200
250
300
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
DUGB7.75
10/20
DUGB5.59 6/21
DUGB6.45
05/22
DUGB3.87501/23
DUGB3.89
03/25
DUGB 504/29
DUGB5.25 1/43
Z-sp
read
(b
ps)
Yiel
d
31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread)
Saudi Arabia z-spread and yield curve (YTD
change)
36: Note: YTD change: 31st December2018 to 31st March 2019, Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium. Note that the recent general upward shift in the yield curve indicates that bonds have sold off across all maturities. Thus yield curve analysis allows us to see which maturities have suffered more and which have suffered less.
100
120
140
160
180
200
220
240
260
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
Z-sp
read
(b
ps)
Yiel
d
31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread)
Kuwait z-spread and yield curve (YTD
change)
37: Note: YTD change: 31st December2018 to 31st March 2019, , Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium. Note that the recent general upward shift in the yield curve indicates that bonds have sold off across all maturities. Thus yield curve analysis allows us to see which maturities have suffered more and which have suffered less.
30
40
50
60
70
80
90
100
110
120
1
1.5
2
2.5
3
3.5
4
KUWIB 2.75 3/22 KUWIB 3.5 3/27
Z-sp
read
(b
ps)
Yiel
d
31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread)
Bahrain z-spread and yield curve (YTD
change)
38: Note: YTD change: 31st December2018 to 31st March 2019,, S= International Sukuk Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium. Note that the recent general upward shift in the yield curve indicates that bonds have sold off across all maturities. Thus yield curve analysis allows us to see which maturities have suffered more and which have suffered less.
100
150
200
250
300
350
400
450
500
550
1
2
3
4
5
6
7
8
9
Z-sp
read
(b
ps)
Yiel
d
31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread)
Oman z-spread and yield curve (YTD
change)
39: Note: YTD change: 31st December2018 to 31st March 2019, , Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium. Note that the recent general upward shift in the yield curve indicates that bonds have sold off across all maturities. Thus yield curve analysis allows us to see which maturities have suffered more and which have suffered less.
0
100
200
300
400
500
600
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
OMAN3.6256/21
OMAN3.8753/22
OMAN4.1251/23^
OMAN4.756/26
OMAN5.3753/27
OMAN5.6251/28^
OMAN6.5 3/47
OMAN6.75
1/48^
Z-sp
read
(b
ps)
Yiel
d
31-Dec-18(YC) 31-Mar-19 (YC) 31-Dec-18 (Z-spread) 31-Mar-19 (Z-spread)
GCC corporate top performers (spread
performance in 1Q19)
40
Note : YTD change: 31st Dec 2018 to 31st Mar 2019, All bonds are dollar denominated and maturing in 2020 or above “PERP” refers to Perpetual, “Float” refers to floating rate bond Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium.
-90.1-90.1-91.7-94.7
-104.3-108.5-108.5-109.6-110.8-110.8-112.9-112.9
-120.5-122
-131-145-145-147-147
-154-169
-180-180
-193-241
-300-250-200-150-100-500
OILGAS 7 ½ 10/25/27 OILGAS 7 ½ 10/25/27 KWIPKK 4 ½ 02/23/27
ERESQD 4 ⅞ 04/05/22REITDU 5 ⅛ 12/12/22OILGAS 7 ⅝ 11/07/24OILGAS 7 ⅝ 11/07/24 CBIUH 6 ½ PERP
OILGAS 8 ⅜ 11/07/28OILGAS 8 ⅜ 11/07/28
DUBAEE 5 ¼ 11/15/21 DUBAEE 5 ¼ 11/15/21
KWIPKK 9 ⅜ 07/15/20 MERAAS 5.112 05/31/22
DAMACR 6 ⅝ 04/18/23 DUBAEE 4 08/01/20 DUBAEE 4 08/01/20
DUBAEE 4 ½ 08/01/22 DUBAEE 4 ½ 08/01/22
DARALA 6 ⅞ 04/10/22ERESQD 4 ⅜ 05/18/21
SHLFDI 8 ¼ 02/15/25 SHLFDI 8 ¼ 02/15/25
DAMACR 6 ¼ 04/20/22BDRILL 3 ⅞ 05/23/23
Performance from 31 Dec 2018 to 31 Mar 2019
GCC corporate bottom performers (spread
performance in 1Q19)
41
Note : YTD change: 31st Dec 2018 to 31st Mar 2019, All bonds are dollar denominated and maturing in 2020 or above “PERP” refers to Perpetual, “Float” refers to floating rate bond Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium.
690144
10955
433232292827252521171616131212
875511
0100200300400500600700800
EAPART 6 ⅞ 09/28/20 EBIUH Float 03/31/24 TILSUK 6 ½ 11/12/23 LNKLFI 9 12/17/23
NMCLN 1 ⅞ 04/30/25NBOBOM 7 ⅞ PERP
ADCBUH Float 02/03/20 MASQUH Float 11/13/20 BKDBOM 6.85 PERP
ADIBUH 7 ⅛ PERP RASGAS 5.298 09/30/20 RASGAS 5.298 09/30/20 JOMAR 9.85 11/15/23 ADFGFC 6 ¾ 11/01/20 ADWA 3.925 07/28/20 ADWA 3.925 07/28/20 MUBAUH 3.386 12/19/21 QTELQD 4 ½ 01/31/43 QTELQD 4 ½ 01/31/43 DIFCAE 4.325 11/12/24 BGBKKK 7 ¼ PERP
DEWAAE 7 ⅜ 10/21/20DEWAAE 7 ⅜ 10/21/20
ETIAIR 2.785 12/01/24 ETIAIR 2.785 12/01/24
Performance from 31 Dec 2018 to 31 Mar 2019
GCC Investment Grade corporates (BBB- rated
and above only) spread performance in 1Q19
42
Note : YTD change: 31st Dec 2018 to 31st Mar 2019, All bonds are dollar denominated and maturing in 2020 or above “PERP” refers to Perpetual, “Float” refers to floating rate bond Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium.
-59-60-60-61-61-62-63-65-66-67-69
-74-74-74-77-80-80
-85-92
-121
-140-120-100-80-60-40-200
EBIUH 5.16 10/03/33 INTLWT 5.95 12/15/39 INTLWT 5.95 12/15/39
EBIUH 5 08/12/33 EBIUH 3 ¼ 11/14/22
QNBK Float 08/11/21 COMQAT 5 05/24/23
EBIUH Float 04/05/28EBIUH 4 ⅛ 07/06/32
EBIUH 4.235 08/09/32 COMQAT 3 ¼ 06/13/21
EBIUH 4.9 05/23/28 EBIUH 4.56 04/10/28 EBIUH 4 ½ 03/16/27
EBIUH 4.18 10/18/27 TABRED 5 ½ 10/31/25
ABQKQD 3 ½ 02/22/22 KWIPKK 5 03/15/23
KWIPKK 4 ½ 02/23/27KWIPKK 9 ⅜ 07/15/20
Top performers..
Z-spread (bp)
25
25
16
16
12
12
5
5
1
0
0
-100102030
RASGAS 5.298 09/30/20
RASGAS 5.298 09/30/20
ADWA 3.925 07/28/20
ADWA 3.925 07/28/20
QTELQD 4 ½ 01/31/43
QTELQD 4 ½ 01/31/43
DEWAAE 7 ⅜ 10/21/20
DEWAAE 7 ⅜ 10/21/20
EBIUH Float 10/12/20
QGTS 6.267 12/31/33
QGTS 6.267 12/31/33
..bottom performers
Z-spread (bp)
GCC High Yield corporates (rated BB+ and
below only) spread performance in 1Q19
43
Note : YTD change: 31st Dec 2018 to 31st Mar 2019, All bonds are dollar denominated and maturing in 2020 or above “PERP” refers to Perpetual, “Float” refers to floating rate bond Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium.
10927
-9-11-14-14
-26-50-51-51-55-55
-67-70-70
-75-75-76-76
-84-84-86-86-86-89
-145-145-147-147
-154-180-180
-200-150-100-50050100150
TILSUK 6 ½ 11/12/23ADIBUH 7 ⅛ PERP
NMCHSU 5.95 11/21/23NBOBOM 5 ⅝ 09/25/23
TPZMAR 9 ⅛ 07/26/22TPZMAR 9 ⅛ 07/26/22
BKMBOM 4 ⅞ 03/14/23 BKMBOM 3 ¾ 05/03/21 MAZOON 5.2 11/08/27 MAZOON 5.2 11/08/27
OTELOM 6 ⅝ 04/24/28OTELOM 6 ⅝ 04/24/28 ALAHKW 7 ¼ PERP
DUBAEE 5 08/01/24 DUBAEE 5 08/01/24
OTELOM 5 ⅝ 10/24/23OTELOM 5 ⅝ 10/24/23
OMGRID 5.196 05/16/27 OMGRID 5.196 05/16/27 OMGRID 3.958 05/07/25 OMGRID 3.958 05/07/25
BBK 3 ½ 03/24/20 DUBAEE 5 ¾ 11/15/23 DUBAEE 5 ¾ 11/15/23
DARALA 6 ⅞ 03/21/23 DUBAEE 4 08/01/20 DUBAEE 4 08/01/20
DUBAEE 4 ½ 08/01/22 DUBAEE 4 ½ 08/01/22
DARALA 6 ⅞ 04/10/22 SHLFDI 8 ¼ 02/15/25 SHLFDI 8 ¼ 02/15/25
Performance from 31 Dec 2018 to 31 Mar 2019
UAE financials (spread performance in 1Q19)
44
Note : YTD change: 31st Dec 2018 to 31st Mar 2019, All bonds are dollar denominated and maturing in 2020 or above “PERP” refers to Perpetual, “Float” refers to floating rate bond Source: Bloomberg, ADCB
The z-spread is our preferred measure for analyzing the relative value of a bond. The z-spread is the additional yield one gets after having calculated an equilibrium price based on the effective cash flows and comparing that price with the market price. A higher spread implies that the bond is trading at a discount and negative spread implies that the bond is trading at a premium.
-41
-41
-41
-41
-41
-41
-43
-44
-44
-45
-51
-51
-55
-59
-59
-60
-68
-71
-75
-110
-150-100-500
HSBC Float 03/08/20
HSBC Float 07/28/20
HSBC 3.08 09/20/21
HSBC Float 10/04/20
HSBC Float 02/04/20
HSBC 2.84 12/20/21
HSBC 3.015 07/20/22
HSBC 3.0675…
DIBUH 3.664…
HSBC 3.53 04/30/23
HSBC Float 08/08/20
HSBC Float 06/03/21
HSBC Float 04/06/23
HSBC Float 08/14/21
BOSUH 4.23 03/07/22
ALHILA 5 ½ PERP
HSBC Float 05/29/23
BOSUH 3.374…
NOORBK 6 ¼ PERP
CBIUH 6 ½ PERP
Top performers
29
27
-1
-2
-5
-5
-5
-6
-6
-6
-7
-8
-8
-8
-9
-20-10010203040
MASQUH Float 11/13/20
ADIBUH 7 ⅛ PERP
MASQUH 3.61 03/09/20
MASQUH Float 11/09/20
EIBUH 3.542 05/31/21
MASQUH Float 03/01/23
MASQUH Float 10/25/22
MASQUH Float 11/09/22
MASQUH Float 09/19/22
MASQUH Float 09/07/22
MASQUH Float 02/27/23
DIBUH 6 ¾ PERP
MASQUH Float 02/15/21
DIBUH 2.921 06/03/20
MASQUH Float 06/08/22
Bottom performers
45
Disclaimer
ADCB Asset Management Limited (“AAML”), is a member of ADCB Group, licensed by Financial Services Regulatory Authority in Abu Dhabi
Global Markets under financial services permission number 170036.
This publication is intended for general information purposes only. It should not be construed as an offer, recommendation or solicitation to purchase or
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Information and opinions contained herein is are based on various sources, including but not limited to public information, annual reports and statistical
data that AAML considers accurate and reliable. However, AAML makes no representation or warranty as to the accuracy or completeness of any
statement made in or in connection with this publication and accepts no responsibility whatsoever for any loss or damage caused by any act or omission
taken as a result of the information contained in this publication. This publication is intended for customers who are either retail or professional investors.
Charts, graphs and related data or information provided in this publication are intended to serve for illustrative purposes only. The information contained
in this publication is prepared as of a particular date and time and will not reflect subsequent changes in the market or changes in any other factors
relevant to their determination. All statements as to future matters are not guaranteed to be accurate. AAML expressly disclaims any obligation to update
or revise any forward looking statement to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of
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