The price of protecting Dubai’s bonds against default has dropped below 100 basis points for the first time in more than 10 years.
That’s a milestone for the emirate that could not compensate billions of dollars of loan about 10 years ago after spending excessive amounts on acquisitions and construction contracts.
According to CMA prices organized by Bloomberg, Dubai’s credit default swaps were at almost 1,000 basis points in the year 2009, .
But the days when Dubai was seen in the headlines because of its debt are over. And so, like other developing-market peers, the securities have gained from demand for yield, even though Dubai’s still loaded by borrowings that are bigger than its entire economy.
The head of fixed income at Dubai-based Arqaam Capital Ltd, Abdul Kadir Hussain said, another reason is that “there hasn’t been much supply of government bonds out of Dubai.” According to data compiled by Bloomberg, the emirate has not sold debt from 2016.
The decline in the emirate’s credit default swaps has decreased the difference between its contracts and those of Abu Dhabi, its biggest and richer neighbor that bailed out Dubai, to 43 basis points, the narrowest on record.
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