gcc bond chart book · gcc bond chart book a comprehensive overview of the risk and return...
TRANSCRIPT
GCC Bond Chart BookA comprehensive overview of the risk and return parameters of the key securities in the GCC Fixed Income space
Luciano Jannelli
Prerana Seth
Kishore Muktinutalapati
Mohammed Al Hemeiri
2018 review
GCC Bond Markets – Key Takeaways
This GCC Bond Chart Book provides a comprehensive overview of the bond market performance in 2018 (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, including developed and emerging market bonds suffered in 2018. However, GCC dollar
bonds have posted positive returns in 2018, in spite of the volatile oil prices in the last quarter of 2018. Our key
takeaway is – GCC markets remain relatively resilient, confirming our view that the region’s financial markets
(including equities) are relatively insulated from (the repricing of) global growth concerns (see in particular on page 6
the performance of the higher quality sovereigns).
Yet, 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.
GCC corporate credits have been relatively resilient when compared to corporate bond markets of other EM regions
(Page 8) and also amidst the decline in oil prices. A correction in oil prices in 2019 will prove supportive for the GCC
credit markets.
With majority of the GCC countries moving to an expansionary fiscal policy to boost growth, sovereign bond issuance
(both local and international) is slated to be higher in 2019. However, we expect the demand to be easily absorbed.
Inclusion of GCC bonds in JP Morgan’s Emerging Market Bond Index will attract sizeable fund inflows, leading to
tighter spreads.
All in all, ADCB’ s House View remains cautious about the outlook of global risk assets, and in particular emerging
market assets (bonds and equities) in which we have a tactical underweight. Having said so, within the broader asset
class we are relatively constructive on the GCC bond markets, and maintain a tactical overweight in the higher quality
sovereigns.
2
Index
Chapter I: GCC bond performance in 2018
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
GCC countries: US dollar bond performance
versus EM indices
5
Source: Bloomberg, Barclays indices, ADCB
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Bahrain Kuwait Qatar SaudiArabia
UAE
% r
etu
rn
Jan-Dec 2018
-5.0
-4.5
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
% r
etu
rn
GCC Sovereign: 10-year dollar bond yield
performance
6
3.8
4.8
5.8
6.8
7.8
8.8
9.8
10.8
Jan-18 Mar-18 May-18 Jul-18 Aug-18 Oct-18 Dec-181
0-y
ear
bo
nd
yie
ld (
%)
Oman underperformed the most in 4Q18
Brazil Bahrain Oman Argentina
2.8
3
3.2
3.4
3.6
3.8
4
4.2
4.4
4.6
4.8
5
5.2
Jan-18 Mar-18 May-18 Jul-18 Aug-18 Oct-18 Dec-18
10
-yea
r b
on
d y
ield
(%
)
Better quality GCC sovereigns continue to be resilient
Mexico Qatar Saudi Arabia Abu Dhabi
South Korea Indonesia Dubai Kuwait
Source: Bloomberg, ADCB
GCC Sovereign: 30-year dollar bond yield
performance
7
5
6
7
8
9
10
11
30
-yea
r b
on
d y
ield
(%
)
Bahrain is trading cheap versus Turkey
Turkey Bahrain Oman Argentina Brazil
3
3.5
4
4.5
5
5.5
6
Jan-18 Feb-18 Apr-18 Jun-18 Jul-18 Sep-18 Oct-18 Dec-18
Dubai is trading cheap versus other EM peers
Mexico Qatar Saudi Arabia Abu DhabiSouth Korea Indonesia Dubai
Source: Bloomberg, ADCB
GCC corporate bond performance
8
Source: Credit Suisse Indices, Bloomberg Barclays Indices, Bloomberg, ADCB
20
30
40
50
60
70
80
90
100
110
120
125
130
135
140
145
150
155
Jan-14 Oct-14 Aug-15 Jun-16 Apr-17 Feb-18 Dec-18
USD
/bb
l
..even amidst the drop in oil prices
GCC credit index (LHS) Brent Crude (RHS)
150
200
250
300
350
400
450
500
550
600
Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18
GCC credit relatively resilient..
EM Middle East Corp. Bond IndexEM Asia Corp. Bond IndexEM East. Europe Corp. Bond IndexEM EMEA Corp. Bond Index
GCC CDS performance versus EM
9
Source: Bloomberg, ADCB
70
90
110
130
150
170
190
210
230
250
70
80
90
100
110
120
130
Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19
CD
S sp
read
(In
dex
ed a
t Ja
n 2
01
8=1
00
)
CD
S sp
read
(In
dex
ed a
t Ja
n 2
01
8=1
00
)
Saudi Arabia CDS widened the most in 4Q18
Dubai Saudi Arabia Kuwait Abu Dhabi
Bahrain (RHS) Oman EM average
-400 -200 0 200 400
QatarSouth Korea
KuwaitThailand
Abu DhabiHungary
DubaiCzech
Saudi ArabiaChile
RomaniaChina
PolandRussia
PeruPhilippines
BahrainIndiaBrazil
MexicoMalaysia
IndonesiaColombia
South AfricaEgyptOman
TurkeyArgentina
GCC sovereign CDS have been rangebound
2018 change in 5-year CDS
Chapter II: Primary market bond
issuances in GCC
11
JP Morgan bond index inclusion
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 will be phased over nine months
beginning 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
12
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
13
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
14
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 trend
15
4 3 3 3
40
50
37
0
10
20
30
40
50
60
2012 2013 2014 2015 2016 2017 2018
USD
bn
Sovereign dollar bond issuance has more than tripled
GCC sovereign dollar bond issuance (USD bn)
0 20 40 60
2016
2017
2018
USDbn
Bulk of issuance from Saudi Arabia
UAE Bahrain Kuwait Oman Qatar Saudi Arabia
Source: Bloomberg, ADCB
Corporate dollar bond issuance trend
16
9
1922
14
24
31
42
0
5
10
15
20
25
30
35
40
45
2012 2013 2014 2015 2016 2017 2018
USD
bn
Corporate dollar bond issuance
0
5
10
15
20
25
30
35
40
2016 2017 2018
USD
bn
Financials and Agencies dominate issuance
Agency Financials Industrial
Real Estate Utility
Source: Bloomberg, ADCB
Saudi’s first dollar bond sale of 2019 was a
success
17Note: “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
18
Strong demand for GCC sovereign bond issuers in 2018
4.4x4.7x
2.3x
2.1x 2.4x
0
10
20
30
40
50
60
70
Qatar's 3-tranchebond deal
Saudi 3-tranchebond deal
Oman's 3 tranchebond deal
Bahrain 7.5yrSukuk
Sharjah 7.5yrSukuk
USD
bn
Strong demand for bond issuances in 2018
Issue size Bids amount received
Source: Bloomberg, ADCB
Major corporate dollar bond deals of 2018
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, ^Fitch rating used instead of Moody’s rating Source: Bloomberg
Corporate Issuer
Bloomberg
Ticker Sector Country
Amount
Issued Coupon Maturity Maturity Type Issue Date
Moody
Rtg
Priced at
issue
(spread,
bp)*
QNB Finance Ltd QNBK Agency QA 1500 0 5/31/2021 AT MATURITY 5/31/2018 Aa3 -
QNB Finance Ltd QNBK Agency QA 1388 0 2/12/2020 AT MATURITY 2/12/2018 Aa3 -
Saudi Electricity Global Sukuk Co 4 SECO Agency SA 1200 4.72 9/27/2028 AT MATURITY 9/27/2018 A2 M+160
DP World Ltd DPWDU Financials AE 1000 5.63 9/25/2048 AT MATURITY 9/25/2018 Baa1 T+251
Abu Dhabi National Energy Co PJSC TAQAUH Agency AE 1000 0 4/23/2030 AT MATURITY 4/23/2018 Baa1 T+205
SABIC Capital II BV SABIC Financials SA 1000 4.00 10/10/2023 AT MATURITY 10/10/2018 A3 T+115
SABIC Capital II BV SABIC Agency SA 1000 4.50 10/10/2028 AT MATURITY 10/10/2018 A3 T+155
DP World Crescent Ltd DPWDU Agency AE 1000 0.00 9/26/2028 AT MATURITY 9/26/2018 Aa3 T+181
DIB Sukuk Ltd DIBUHFinancial Institutions AE 1000 3.63 2/6/2023 AT MATURITY 2/6/2018 Baa3 M+115
QNB Finance Ltd QNBK Agency QA 1000 3.94 2/7/2020 AT MATURITY 2/7/2018 B2 -
Shelf Drilling Holdings Ltd SHLFDI Industrial AE 900 8.25 2/15/2025 CALLABLE 2/7/2018 A2 T+557
Oztel Holdings SPC Ltd OTELOM Financials OM 900 6.63 - AT MATURITY 4/24/2018 B1 T+406
Saudi Electricity Global Sukuk Co 4 SECO Agency SA 800 4.22 1/27/2024 AT MATURITY 9/27/2018 Aa3 M+115
MDC-GMTN BV MUBAUH Financials AE 800 4.50 11/7/2028 AT MATURITY 11/7/2018 Aa3 T+141
ADIB Capital Invest 2 Ltd ADIBUH Financials AE 750 7.13 - PERP/CALL 9/20/2018 Aa3 T+427
ADCB Finance Cayman Ltd ADCBUH Financials AE 750 4.00 3/29/2023 AT MATURITY 3/29/2018 Baa3 T+145
Abu Dhabi National Energy Co PJSC TAQAUH Financials AE 750 4.38 4/23/2025 AT MATURITY 4/23/2018 - T+160
QNB Finance Ltd QNBK Financials QA 720 0.00 1/23/2048 CALLABLE 1/23/2018 A1 -
Fab Sukuk Co Ltd FABUH Financials AE 650 3.63 3/5/2023 AT MATURITY 3/5/2018 - M+95
First Abu Dhabi Bank PJSC FABUH Financials AE 610 0.00 1/22/2048 CALLABLE 1/22/2018 Baa3 -
Oztel Holdings SPC Ltd OTELOM Financials OM 600 5.63 10/24/2023 AT MATURITY 4/24/2018 A2 -
Zahidi Ltd EMIRAT Financials AE 600 4.50 3/22/2028 SINKABLE 3/22/2018 Baa3 T+198
Oztel Holdings SPC Ltd OTELOM Financials OM 600 5.63 10/24/2023 AT MATURITY 4/24/2018 A3 -
ADCB Finance Cayman Ltd ADCBUH Financials AE 540 0.00 1/18/2048 CALLABLE 1/18/2018 B1 -
Nile Delta Sukuk Ltd DANAUH Financials AE 530.406 4.00 10/31/2020 CALLABLE 8/13/2018 A3 -
National Bank of Oman SAOG NBOBOM Financials OM 500 5.63 9/25/2023 AT MATURITY 9/25/2018 A1 T+282
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
2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047
USD
bn
Principal Interest
21
Dubai Sovereign Dollar Debt Maturity Profile
Source: Bloomberg, ADCB
0
2
4
6
8
10
122
01
9
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
0
1
2
3
4
5
6
7
8
2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049
USD
bn
Principal Interest
Source: Bloomberg, ADCB
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
0
0.5
1
1.5
2
2.5
2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047
USD
bn
Principal Interest
Source: Bloomberg, ADCB
25
Oman Sovereign Dollar Debt Maturity Profile
Source: Bloomberg, ADCB
0
0.5
1
1.5
2
2.5
3
3.5
2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047
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
ColombiaMexicoChile
Peru
Turkey
Russia
South Africa
QatarSaudi Arabia
Hungary
Abu DhabiPoland
Bahrain
Romania
KuwaitSouth Korea
China
Indonesia
Philippines
Oman
Argentina
Egypt
Dubai*
3
4
5
6
7
8
9
10
11
10
-ye
ar y
ield
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
BrazilColombia
Mexico
Chile Peru
Turkey
Russia
South Africa
Qatar
Saudi Arabia
HungaryAbu Dhabi
Bahrain
Romania
South Korea
Indonesia
Oman
Argentina
Egypt
Dubai
3
4
5
6
7
8
9
10
11
30
-yea
r yi
eld
s
GCC sovereigns appear cheap versus other EM
AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B
AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B
BrazilColombiaMexico
ChilePeru
Turkey
Russia
South Africa
QatarSaudi Arabia
Dubai*
HungaryAbu Dhabi Poland
Bahrain
RomaniaCzech
Kuwait
South Korea
China
Indonesia
IndiaMalaysia
PhilippinesThailandUK Spain
Italy
France Austria Belgium
Argentina
Oman
0
100
200
300
400
500
600
700
800
900
CD
S sp
read
s (b
p)
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
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
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
Ku
wai
tA
l Ah
li U
nit
ed b
ank
Bu
rgan
Ban
kK
uw
ait
Inte
rnat
ion
al B
ank
Ku
wai
t Fi
nan
ce H
ou
seB
ou
bya
n B
ank
War
ba
Ban
kQ
atar
Nat
ion
al B
ank
Du
bai
Isla
mic
Ban
kM
ash
req
Ah
li B
ank
QSC
Qat
ar Is
lam
ic B
ank
DO
HA
BA
NK
Al K
hal
iji B
AN
KC
BD
No
or
Ban
k A
l-B
ilad
*R
AK
BA
Nk
NB
FSh
arja
h Is
lam
ic B
ank
Nat
ion
al C
om
mer
cial
Ban
kB
anq
ue
Sau
di F
ran
siR
iyad
Ban
kSa
mb
a Fi
nan
cial
gro
up
Al R
ajh
i Ban
kA
rab
nat
ion
al b
ank
Ah
li U
nit
ed B
ank
Gu
lf In
tl B
ank
Alin
ma
Ban
kSa
ud
i Ho
llan
di
Ban
k A
lJaz
ira
Sau
di I
nve
stm
ent
Ban
kU
nit
ed A
rab
ban
kSa
ud
i Bri
tish
Ban
kB
ank
Mu
scat
NB
OB
ank
Dh
ofa
rB
ank
Soh
ar S
OA
GN
BB
Om
an A
rab
Ban
k*B
ank
Niz
wa*
Bah
rain
Isla
mic
Ban
k
GCC Financials
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
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
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
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 SEC
O
SAB
IC
Sau
di T
elec
om
TAQ
A**
DEW
A
DP
Wo
rld
**
Jafz
**
MA
F
Ald
ar^
DIF
C
Ku
wai
t p
roje
cts
Co
Emaa
r
OM
GR
ID**
Dam
ac
Ezd
an H
old
ing
Bat
elco
Top
az w
orl
d**
Ku
wai
t en
ergy
GCC Corporates
Chapter IV: GCC valuation
analysis
GCC sovereign dollar yield curves
33
BHRAIN 5.875 1/21BHRAIN 6.125 8/23
BHRAIN 7 10/28 BHRAIN 7.5 9/47
OMAN 3.625 6/21 OMAN 3.875 3/22
OMAN 5.375 3/27
OMAN 6.5 3/47
4
5
6
7
8
3yr 5yr 10yr 30yr
ADGB 2.125 5/21ADGB 2.5 10/22
ADGB 3.125 10/27
ADGB 4.125 10/47DUGB 5.59 6/21
DUGB 3.875 01/23
DUGB 5 04/29
DUGB 5.25 1/43
KSA 2.375 10/21KSA 2.875 3/23
KSA 3.625 3/28
KSA 4.625 10/47
KUWIB 2.75 3/22
KUWIB 3.5 3/27
QATAR 2.375 6/21 QATAR 3.875 4/23
QATAR 4.5 4/28
QATAR 5.103 4/48
3
3.5
4
4.5
5
5.5
6
3yr 5yr 10yr 30yr
Source: Bloomberg, ADCB
Abu Dhabi z-spread and yield curve (YTD
change)
34
-60
-10
40
90
140
190
0
1
2
3
4
5
Z-sp
read
(b
ps)
Yiel
d
29-Dec-17(YC) 31-Dec-18 (YC) 29-Dec-17 (Z-spread) 31-Dec-18 (Z-spread)
Note: YTD change: 29th December 2017 to 31st December 2018, , 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.
Dubai z-spread and yield curve (YTD
change)
35: YTD change: 29th December 2017 to 31st December 2018, , 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
0
1
2
3
4
5
6
Z-sp
read
(b
ps)
Yiel
d
29-Dec-17(YC) 31-Dec-18 (YC) 29-Dec-17 (Z-spread) 31-Dec-18 (Z-spread)
Saudi Arabia z-spread and yield curve (YTD
change)
36: YTD change: 29th December 2017 to 31st December 2018, ^ refers to period from the issue date to 31st December 2018, , 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
0
1
2
3
4
5
6
Z-sp
read
(b
ps)
Yiel
d
29-Dec-17(YC) 31-Dec-18 (YC) 29-Dec-17 (Z-spread) 31-Dec-18 (Z-spread)
Kuwait z-spread and yield curve (YTD
change)
37: YTD change: 29th December 2017 to 31st December 2018, , Source: Bloomberg, ADCB
35
45
55
65
75
85
95
105
115
125
135
0
0.5
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
29-Dec-17(YC) 31-Dec-18 (YC) 29-Dec-17 (Z-spread) 31-Dec-18 (Z-spread)
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.
Bahrain z-spread and yield curve (YTD
change)
38: YTD change: 29th December 2017 to 31st December 2018, ^ refers to period from the issue date to 31st December 2018, S= International SukukSource: 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.
200
250
300
350
400
450
500
550
600
0
1
2
3
4
5
6
7
8
9
Z-sp
read
(b
ps)
Yiel
d
29-Dec-17(YC) 31-Dec-18 (YC) 29-Dec-17 (Z-spread) 31-Dec-18 (Z-spread)
Oman z-spread and yield curve (YTD
change)
39: YTD change: 29th December 2017 to 31st December 2018, ^ refers to period from the issue date to 31st December 2018 , 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
600
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Z-sp
read
(b
ps)
Yiel
d
29-Dec-17(YC) 31-Dec-18 (YC) 29-Dec-17 (Z-spread) 31-Dec-18 (Z-spread)
GCC corporate top performers (spread
performance in 2018)
40
Note : YTD change: 29th Dec 2017 to 31st Dec 2018, All bonds are dollar denominated and maturing in 2019 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.
-4.5-4.5-4.6-4.8-4.9-5.2-6.7-7.8-7.8-7.8-8.6-9.0-9.0-10-13-18-25-29
-39-68
-281-396
-425-614
-637
-700-600-500-400-300-200-1000
MASQUH Float 11/09/22 MASQUH Float 10/25/22 MASQUH Float 09/19/22 MASQUH Float 09/07/22
NOORBK 6 ¼ PERP MASQUH Float 06/08/22
BATELC 4 ¼ 05/01/20 MASQUH Float 11/09/20
MUBAUH 6 ⅞ 11/01/41MUBAUH 6 ⅞ 11/01/41
MASQUH Float 01/18/20QTELQD 7 ⅞ 06/10/19QTELQD 7 ⅞ 06/10/19
MASQUH Float 05/25/20 MASQUH Float 10/21/19 MASQUH Float 08/29/19
BUBYAN 6 ¾ PERP EBIUH Float 03/31/24 EBIUH Float 10/12/20
BGBKKK 7 ¼ PERP KUWAIE 9 ½ 08/04/19 EBIUH Float 11/27/23 EBIUH Float 05/16/19
ALHILA Float 01/09/19 EBIUH Float 02/27/19
Performance from 29 Dec 2017 to 31 Dec 2018
GCC corporate bottom performers (spread
performance in 2018)
41
Note : YTD change: 29th Dec 2017 to 31st Dec 2018, All bonds are dollar denominated and with maturing in 2019 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.
2,361510
412379372
273229229225225205202185185173172150145145142121120111105100
05001000150020002500
EAPART 6 ⅞ 09/28/20ERESQD 4 ⅜ 05/18/21
KWIPKK 4.8 02/05/19 DAMACR 6 ¼ 04/20/22
ERESQD 4 ⅞ 04/05/22 DPWDU 1 ¾ 06/19/24 OMGRID 3.958 05/07/25 OMGRID 3.958 05/07/25 OMGRID 5.196 05/16/27 OMGRID 5.196 05/16/27 MAFUAE 5 ½ PERP EBIUH Float 03/11/23 MAZOON 5.2 11/08/27 MAZOON 5.2 11/08/27 FABUH 3 ¼ 01/14/19
NBOBOM 3 ⅛ 10/07/19 BKMBOM 3 ¾ 05/03/21 KWIPKK 4 ½ 02/23/27 DAMACR 4.97 04/09/19
KWIPKK 9 ⅜ 07/15/20 ALHILA 5 ½ PERP EBIUH 5.35 07/11/22 KWIPKK 5 03/15/23 EBIUH 2.65 04/12/19 EMAAR 3.635 09/15/26
Performance from 29 Dec 2017 to 31 Dec 2018
GCC Investment Grade corporates (BBB- rated
and above only) spread performance in 2018
42
Note : YTD change: 29th Dec 2017 to 31st Dec 2018, All bonds are dollar denominated and with maturing in 2019 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.
444221
-3-5-5-8-8-8-9-9-18-29-39
-396-425
-614
-750-550-350-15050
MASQUH Float 02/28/21 QTELQD 4 ½ 01/31/43 QTELQD 4 ½ 01/31/43 RASGAS 6 ¾ 09/30/19 RASGAS 6 ¾ 09/30/19 EBIUH Float 01/26/20
UNBUH Float 02/28/22 MASQUH Float 11/09/22 MASQUH Float 10/25/22 MASQUH Float 11/09/20
MUBAUH 6 ⅞ 11/01/41MUBAUH 6 ⅞ 11/01/41
QTELQD 7 ⅞ 06/10/19QTELQD 7 ⅞ 06/10/19
MASQUH Float 08/29/19 EBIUH Float 03/31/24 EBIUH Float 10/12/20 EBIUH Float 11/27/23 EBIUH Float 05/16/19
ALHILA Float 01/09/19
Top performers..
Z-spread (bp)
636565666670
777981818387
9494
105120
150173
202273
0100200300
EBIUH 2.7 03/30/19 EBIUH 4.27 09/28/37 EBIUH 4 ½ 03/16/27 FABUH 4.365 08/09/32 FABUH 4.1 09/24/32
EBIUH 4 ⅛ 07/06/32 EBIUH Float 04/10/19 MAFUAE 4 ¾ 05/07/24 GULINT 3 ½ 03/25/22 RAKBNK Float 07/24/21 EBIUH Float 04/26/19
ETISLT 2 ⅜ 06/18/19 DOLNRG 5.888 06/15/19 DOLNRG 5.888 06/15/19 EBIUH 2.65 04/12/19 EBIUH 5.35 07/11/22 BKMBOM 3 ¾ 05/03/21 FABUH 3 ¼ 01/14/19 EBIUH Float 03/11/23 DPWDU 1 ¾ 06/19/24
..bottom performers
Z-spread (bp)
GCC High Yield corporates (rated BB+ and
below only) spread performance in 2018
43
Note : YTD change: 29th Dec 2017 to 31st Dec 2018, All bonds are dollar denominated and with maturing in 2019 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.
379
229
229
205
150
145
2
-281
-400-300-200-1000100200300400500
DAMACR 6 ¼ 04/20/22
OMGRID 3.958 05/07/25
OMGRID 3.958 05/07/25
MAFUAE 5 ½ PERP
BKMBOM 3 ¾ 05/03/21
DAMACR 4.97 04/09/19
FABUH 5 ¼ PERP
KUWAIE 9 ½ 08/04/19
Performance from 29 Dec 2017 to 31 Dec 2018
UAE financials (spread performance in 2018)
44
Note : YTD change: 29th Dec 2017 to 31st Dec 2018, All bonds are dollar denominated and with maturing in 2019 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.
121
39
34
34
4
-2
-5
-5
-5
-5
-5
-5
-8
-9
-10
-13
-18
-40-20020406080100120140
ALHILA 5 ½ PERP
CBDUH 4 11/17/20
EIBUH 3.542 05/31/21
DIFCAE 4.325 11/12/24
MASQUH Float 02/28/21
MASQUH Float 05/22/22
MASQUH Float 11/09/22
MASQUH Float 10/25/22
MASQUH Float 09/19/22
MASQUH Float 09/07/22
NOORBK 6 ¼ PERP
MASQUH Float 06/08/22
MASQUH Float 11/09/20
MASQUH Float 01/18/20
MASQUH Float 05/25/20
MASQUH Float 10/21/19
MASQUH Float 08/29/19
Performance from 29 Dec 2017 to 31 Dec 2018
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
dispose of any securities or to enter in any transaction or adopt any hedging, trading or investment strategy. Neither this publication nor anything
contained herein shall form the basis of any contract or commitment whatsoever. Distribution of this publication does not oblige ADCB Group to enter into
any transaction. The content of this publication should not be considered as legal, regulatory, credit, tax or accounting advice. Anyone proposing to rely
on or use the information contained in the publication should independently verify and check the accuracy, completeness, reliability and suitability of the
information and should obtain independent and specific advice from appropriate professionals or experts regarding information contained in this
publication. Investment products are not available to US persons.
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
unanticipated events.
ADCB Group does and may at any time solicit or provide commercial banking, investment banking, credit, advisory or other services to the companies
covered in its publications. As a result, recipients of this publication should be aware that any or all of foregoing services may at time give rise to a
conflict of interest that could affect the objectivity of this publication. Opinions expressed herein may differ from opinions expressed by other businesses
or affiliates of ADCB Group.
Past performance does not guarantee future results. Investment products are not bank deposits and are not guaranteed by ADCB Group. They are
subject to investment risk, including possible of loss of principal amount invested. This publication may not be reproduced or circulated without ADCB
Group written authority. The manner of circulation and distribution may be restricted by law or regulation in certain jurisdictions. Persons who come into
possession of this document are required to inform themselves of, and to observe such restrictions. Any unauthorized use, duplication, or disclosure of
this document is prohibited by law and may result in prosecution.