Bond issuance in the Gulf predicted to climb next year - report
According to a report by Arabian Business, the issuance of bonds in the Gulf region is expected to rise in 2014 due to refinancing and heavy capital spending on infrastructure. Moreover, the report also said the sovereign of Abu Dhabi could return to the market after its hiatus spanning over five years.
Thomson Reuters unit IFR revealed data, which read that the issuance of conventional bonds and sukuk in the region dropped to $28.97 billion this year, as compared to $36.90 billion last year. The drop was attributed to concerns about the plans of the US Federal Reserve's monthly bond purchases and partly because of Abu Dhabi and its government-related entities' (GRE) absence in the market. The Fed's plan to taper its $85 billion monthly bond purchases has increased the bond spreads all over the world, the report stated.
For now, the report said, global markets are reacting calmly to the Fed starting its process to cut back on its monthly purchases. In the next 12 months, Abu Dhabi-linked obligations worth billions of dollars will be due by then, and the emirate is projected to replace some of them at least with new paper.
Morgan Stanley head of investment banking for the Middle East and North Africa Klaus Froehlich said, "We think $40-45 billion could be possible next year as more non-government issuers come to the market and large sovereign refinancings boost the overall volumes."
Since its debut deal back in 2009, the sovereign of Abu Dhabi has yet to issue public debt and has $1.5 billion which will mature in April next year.
National Bank of Abu Dhabi executive director for credit and alternative investments Chavan Bhogaita said, "There would be a lot of investor interest in Abu Dhabi sovereign paper. But the argument that they don't need the money is quite powerful and I don't think their position in this regard has changed in the last 12 months."