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MENA Daily Fixed Income Report - 22 March

IM Insights
By IM Insights
6 months ago
MENA Daily Fixed Income Report - 22 March

Sukuk


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  1. MENA Daily Fixed Income Report – 22 March 2021 Kuwait Financial Centre “Markaz” News Updates Kuwait liquidity crunch unlikely until third quarter, says BofA – Steps taken by the Kuwaiti government to mitigate depletion of the treasury’s liquid assets could push back the risk of a liquidity crunch to the third quarter this year, Bank of America estimates. Kuwait’s General Reserve Fund (GRF), the sovereign fund used to cover state deficits, has been squeezed by the coronavirus-driven drop in oil prices and a continued stand-off between government and parliament on implementing measures such as a law to allowing state borrowing. The fund raised about 6 billion to 7 billion dinars ($19.87 billion to $23.19 billion) in recent months through asset swaps with Kuwait’s Future Generations Fund (FGF) and thanks to money returned to the GRF after a law last year halted a mandatory annual transfer of 10% of state revenue to FGF. “Authorities have taken steps to mitigate the depletion of the liquid assets in the GRF. We estimate this lengthened the timeline for depletion of GRF liquidity until 3Q21,” BofA said in a report. “Clawback of accrued dividends from government entities could lengthen this timeline further.” The GRF is negotiating with state-owned Kuwait Petroleum Corporation on a new payment schedule for more than $20 billion in accrued dividends, sources told Reuters this month. While such negotiations could boost GRF liquidity, the transfers are likely to occur over a relatively long timeframe rather than on up front, said BofA. “Without passage of a law permitting new debt issuance, the GRF could run out of liquidity in the coming months without further measures to replenish it,” Fitch said. (Source: Reuters) Fitch: Turkey Rate Increase Reinforces Orthodox Policy Approach – Rebuilding policy credibility will take time and “is subject to implementation risks and dependent on the continuation of a tight monetary policy,” Fitch Ratings says. Thursday’s bigger-than-expected policy rate increase is “consistent with the CBRT’s stated focus on achieving sustained disinflation, reversing dollarization and rebuilding foreign-exchange reserves”. There’s been “little progress on structural reforms in recent years and the political backdrop may become less conducive ahead of presidential and legislative elections due by June 2023”. Higher oil prices “mean that the current account deficit may narrow less this year than we forecast (to 2.9% of GDP from 5.3%) at the time of our February rating review, highlighting the importance of maintaining investor confidence”. Fitch expects Turkish economy to slow in 2H21 due to tighter monetary and credit conditions, and a more conservative fiscal stance. Fitch expects CBRT to ease policy toward end-2021, as easing inflation will enable it to keep real interest rates positive. (Source: Bloomberg) Fed will raise rates when economy meets conditions, Barkin says – Longer-term borrowing costs are rising because of increased economic optimism and some expectations of rising inflation, Richmond Federal Reserve Bank President Thomas Barkin said on Friday, but the Fed won’t be raising short-term interest rates until the economy meets clear benchmarks. “I expect to start raising rates when we meet the conditions that we’ve talked about,” Barkin said on CNBC. The Fed has promised not to raise rates until the economy has reached full employment and inflation has not only hit the Fed’s 2% goal but is on track to exceed that goal for some time. “I don’t have a sense that there’s a timing, there’s a year, there’s a month, there’s a quarter that I’m thinking about,” he said. (Source: Reuters) GCC Sovereign Yields Sovereigns Maturity Yield % Abu Dhabi 2025 1.06 Price ∆ (YTD %) -1.41 Abu Dhabi 2030 2.19 Abu Dhabi 2050 Bahrain Bahrain Bahrain Dubai Sovereign Ratings Maturity Yield % KSA 2025 1.39 Price ∆ (YTD %) -1.27 Kuwait A1 AA- -4.96 KSA 2030 2.56 -4.41 KSA A1 A-u A 3.37 -10.97 KSA 2050 3.93 -10.50 UAE Aa2 NR AA- 2026 3.39 -0.99 Oman 2025 3.48 2.25 AA AA 5.73 -6.64 Oman 2029 5.11 1.86 Abu Dhabi Aa2 2030 2047 6.96 -9.97 Oman 2048 6.88 -1.73 Qatar Aa3 AA- AA- -1.40 Bahrain B2 B+ B+ Ba3 B+ BB- 2029 2.72 -1.79 Sovereigns Qatar 2025 1.10 Moody’s S&P Fitch AA Kuwait 2022 0.09 -0.53 Qatar 2030 2.24 -5.02 Oman Kuwait 2027 1.59 -3.09 Qatar 2050 3.50 -11.31 Egypt B2 B B+ Lebanon C SD RD Bonds and Sukuk Indices Index Name Bloomberg GCC FI Index Yield % Duration (yrs) 1D ∆ (%) YTD ∆ (%) Jordan B1 B+ BB- 2.81 8.08 0.11 -3.04 Turkey B2 B+u BB- B3 NR B S&P MENA Bond and Sukuk Index 2.38 NA 0.27 -3.66 Tunisia Bloomberg Emerging Markets USD Index 3.90 6.80 0.16 -3.12 Morocco Ba1 BBB- BB+ -3.97 US Aaa AA+u AAA UK Aa3 AAu AA- China A1 A+ Bloomberg Global Aggregate Index 1.16 7.42 -0.01 Interbank Rates (%) KIBOR SAIBOR BHIBOR QATAR AEIBOR EURIBOR LIBOR 3 Months 22/3/2021 31/12/2020 1.5000 1.4375 0.7963 0.8175 1.6583 2.2500 1.0850 1.1206 0.3625 0.5125 -0.5390 -0.5450 0.1969 0.2384 USD Swap Rates Yield % 1-Year 2-Year 5-Year 7-Year 10-Year 30-Year 0.2046 0.2589 0.9459 1.3456 1.6967 2.1266 Currencies 1D ∆ (bps) 0.19 -0.27 -3.26 -4.32 -4.97 -5.79 YTD ∆ (%) 6.3 30.9 120.0 105.6 83.4 51.7 USD KWD SAR BHD QAR OMR AED US Treasuries 2-Year 5-Year 10-Year 30-Year 6 Months 22/3/2021 31/12/2020 1.6875 1.6875 0.8438 0.8700 1.7583 2.5333 1.1667 1.1960 0.4989 0.4908 -0.5150 -0.5260 0.2024 0.2576 0.3020 3.7512 0.3771 3.6414 0.3850 3.6730 Commodities 1D ∆ (bps) 0.0000 0.0000 0.0000 0.0082 0.0000 0.0000 YTD ∆ (%) 0.43 0.03 -0.01 0.00 0.00 0.00 UK Guilts Yield % 0.14 0.84 1.67 2.38 1D ∆ (%) 0.02 0.18 0.44 1.18 Yield % 0.08 0.38 0.83 1.36 12 Months 22/3/2021 31/12/2020 2.0000 1.9375 0.9163 0.9413 2.1350 2.6833 1.2933 1.3636 0.6349 0.6538 -0.4830 -0.4990 0.2763 0.3419 USD Gold Silver Copper Nat. Gas Aluminum Crude Oil 1,742.60 25.86 411.55 2.50 2,249.00 64.27 YTD ∆ (%) -8.42 -2.33 16.78 -1.69 13.46 24.12 German Bunds 1D ∆ (%) 0.03 0.15 0.39 0.84 Yield % -0.66 -0.71 -0.41 0.28 1D ∆ (%) 0.01 0.08 0.26 0.54 A+ USD 5Yr CDS 22-Mar 2021 31-Dec 2020 Kuwait 42.36 40.69 KSA 60.33 63.77 Abu Dhabi 41.52 36.03 Dubai 92.59 104.06 Qatar 41.50 36.70 Bahrain 187.34 233.58 Oman 277.48 353.60 Iraq 406.60 542.74 Egypt 284.20 330.47 Morocco 87.40 102.56 Turkey 304.46 299.47 US 8.45 11.52 UK 11.56 15.13 China 31.15 26.70 Japan 15.06 14.74 Germany 8.30 9.09 France 13.77 14.42 This report has been prepared and issued by Kuwait Financial Centre K.P.S.C. (Markaz) , which is regulated by the Capital Markets Authority and the Central Bank of Kuwait. The report is owned by Markaz and is privileged and proprietary and is subject to copyrights. Sale of any copies of this report is strictly prohibited. This report can not be published. A number of sources which include Bloomberg, Zawya, and daily newspapers were utilized in the creation of this report.