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
Mohammed Al Hemeiri
1H 2018
GCC Bond Markets – Key Takeaways
This GCC Bond Chart Book provides a comprehensive overview of the trends in GCC dollar bond issuances so far
this year (Chapter I), the bond market performance (Chapter II) and finally the bond valuations compared mostly with
other emerging market peers (Chapter III and Chapter IV).
Like most emerging bond markets, GCC bonds also have come under pressure in 2018. Our key takeaway however is
that – with the exception of Bahrain and Oman – GCC markets have been relatively resilient, confirming our view that
the region’s financial markets (including equities) remain relatively insulated from (the repricing of) global growth
concerns (see in particular on page 23 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 (this, of course, is most marked for Bahrain and Oman).
Whilst GCC corporate credits have been relatively resilient when compared to corporate bond markets of other EM
regions (Page 22), there still appears to be value if one contrasts current price trends with past price movements in
the presence of a rising oil price.
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: Primary market bond issuances in
GCC
Chapter II: GCC bond performance
Chapter III: Credit rating valuation
Chapter IV: GCC valuation analysis
3
Chapter I: Primary market bond
issuances in GCC
Sovereign dollar bond issuance trend
5
4 3 3 3
40
50
32
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
1H 2018
USDbn
Bulk of issuance from Saudi Arabia
UAE Bahrain Kuwait Oman Qatar Saudi Arabia
Source: Bloomberg, ADCB
Corporate dollar bond issuance trend
6
9
19
22
14
24
31
21
0
5
10
15
20
25
30
35
2012 2013 2014 2015 2016 2017 2018*
USD
bn
Corporate dollar bond issuance
0
5
10
15
20
25
30
35
2016 2017 1H 2018
USD
bn
Financials and Agencies dominate issuance
Agency Financials Industrial
Real Estate Utility
Source: Bloomberg, ADCB
7
Strong demand for GCC sovereign bond issuers
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 this year
Issue size Bids amount received
Source: Bloomberg, ADCB
Saudi sovereign dollar bond issuance 2018
8
11
52
0
20
40
60
80
USD
bn
Strong demand for the 3-tranche bond
deal
Issue size
4.5
3
3.5
Issue size (bn)
7y 12y 31y
T+140
T+175
T+210
T+170
T+200
T+235
130
150
170
190
210
230
250
7y 12y 31y
bp
Saudi USD11bn 3-tranche bond deal
Final Pricing Initial Pricing
-10%
10%
30%
50%
70%
90%
Fundmanagers
Banks Central banks Insurance &pension funds
% o
f th
e p
rim
ary
issu
ance
Subscribers’ share of total issuance
7y 12y 31y
0%
10%
20%
30%
40%
50%
60%
US Europe Asia Middle east% o
f th
e p
rim
ary
issu
ance
Subscribers’ nationality as a share of total issuance
7y 12y 31y
Note: “T” refers to similar-maturity treasuries Source: Bloomberg, ADCB
Other GCC sovereign issuances 2018
9
Oman USD6.5bn 3-tranche dollar bond issuance
Bahrain USD1bn 7.5yr Dollar Sukuk
1.25
2.5
2.75
Issue size (bn)
5yr 10yr 30yr
59%16%
14%
9%2%
Region-wise distribution
MENA Europe UK US Asia
63%
33%
3% 1%Investor-type distribution
Banks/Private banks Fund managers
Pensions and Insurance Others
Note: “T” refers to similar-maturity treasuries Source: Bloomberg, ADCB
T+190
T+310
T+395
T+205
T+325
T+410
150
250
350
450
5yr 10yr 30yr
Oman USD6.5bn 3-trance bond deal
Final Pricing Initial Pricing
Major corporate dollar bond deals
10
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. 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 -
Abu Dhabi National Energy Co PJSC TAQAUH Agency AE 1000 4.88 4/23/2030 AT MATURITY 4/23/2018 A3 T+205
DIB Sukuk Ltd DIBUH Financials AE 1000 3.63 2/6/2023 AT MATURITY 2/6/2018 A3 M+115
QNB Finance Ltd QNBK Agency QA 1000 0 2/7/2020 AT MATURITY 2/7/2018 Aa3 -
Abu Dhabi National Energy Co PJSC TAQAUH Agency AE 1000 4.88 4/23/2030 AT MATURITY 4/23/2018 A3 T+ 205
Shelf Drilling Holdings Ltd SHLFDI Industrial AE 900 8.25 2/15/2025 CALLABLE 2/7/2018 B2 T+557
Oztel Holdings SPC Ltd OTELOM Agency OM 900 6.63 4/24/2028 AT MATURITY 4/24/2018 Baa3 T+405
ADCB Finance Cayman Ltd ADCBUH Agency AE 750 4.00 3/29/2023 AT MATURITY 3/29/2018 - T+145
Abu Dhabi National Energy Co PJSC TAQAUH Agency AE 750 4.38 4/23/2025 AT MATURITY 4/23/2018 A3 T+160
QNB Finance Ltd QNBK Agency QA 720 0.00 1/23/2048 CALLABLE 1/23/2018 Aa3 -
Fab Sukuk Co Ltd FABUH Agency AE 650 3.63 3/5/2023 AT MATURITY 3/5/2018 Aa3 M+95
First Abu Dhabi Bank PJSC FABUH Agency AE 610 0.00 1/22/2048 CALLABLE 1/22/2018 Aa3 -
Oztel Holdings SPC Ltd OTELOM Agency OM 600 5.63 10/24/2023 AT MATURITY 4/24/2018 Baa3 -
Zahidi Ltd EMIRAT Industrial AE 600 4.50 3/22/2028 SINKABLE 3/22/2018 - T+198
Shelf Drilling Holdings Ltd SHLFDI Industrial AE 600 8.25 2/15/2025 CALLABLE 2/7/2018 B2 T+557
ADCB Finance Cayman Ltd ADCBUH Agency AE 540 0 1/18/2048 CALLABLE 1/18/2018 - -
CBQ Finance Ltd COMQAT Financials QA 500 5.00 5/24/2023 AT MATURITY 5/24/2018 A3 M+213
Bank Muscat SAOG BKMBOM Financials OM 500 4.88 3/14/2023 AT MATURITY 3/14/2018 Baa3 M+230
Noor Sukuk Co Ltd NOORBK Agency AE 500 4.47 4/24/2023 AT MATURITY 4/24/2018 - M+165
Dar Al-Arkan Sukuk Co Ltd DARALA Industrial SA 500 6.88 3/21/2023 AT MATURITY 3/21/2018 B1 M+437
Union National Bank PJSC UNBUH Agency AE 500 4.00 3/13/2023 AT MATURITY 3/13/2018 A1 M+135
SIB Sukuk Co III Ltd SIB Financials AE 500 4.23 4/18/2023 AT MATURITY 4/18/2018 A3 M+150
11
Weaker economies need to scale up their diversification
-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
Abu Dhabi Sovereign Dollar Debt Maturity Profile
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046
USD
bn
Principal Interest
Source: Bloomberg, ADCB
13
Dubai Sovereign Dollar Debt Maturity Profile
0
2
4
6
8
10
122
01
8
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
Source: Bloomberg, ADCB
14
Saudi Arabia Sovereign Dollar Debt Maturity Profile
0
1
2
3
4
5
6
7
8
2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048
USD
bn
Principal Interest
Source: Bloomberg, ADCB
15
Kuwait Sovereign Dollar Debt Maturity Profile
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
USD
bn
Principal Interest
Source: Bloomberg, ADCB
16
Bahrain Sovereign Dollar Debt Maturity Profile
0
0.5
1
1.5
2
2.5
2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046
USD
bn
Principal Interest
Source: Bloomberg, ADCB
17
Oman Sovereign Dollar Debt Maturity Profile
0
0.5
1
1.5
2
2.5
3
3.5
2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048
USD
bn
Principal Interest
Source: Bloomberg, ADCB
Chapter II: GCC bond market
performance
GCC countries: US dollar bond performance
versus EM indices
19
-5
-4.5
-4
-3.5
-3
-2.5
-2
-1.5
-1
-0.5
0
Bahrain Saudi Arabia Kuwait Qatar
% r
etu
rn
Jan-Jun 2018
-6
-5
-4
-3
-2
-1
0
EM EMLATAM
EMEMEA
EMAsia
% r
etu
rn
Source: Bloomberg, Barclays indices, ADCB
GCC Sovereign: 10-year dollar bond yield
performance
20
3.75
4.75
5.75
6.75
7.75
8.75
9.75
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-181
0-y
ear
bo
nd
yie
ld (
%)
Bahrain has underperformed the most versus its peers
Brazil Bahrain Oman Argentina
2.8
3.3
3.8
4.3
4.8
5.3
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18
10
-yea
r b
on
d y
ield
(%
)
Better quality sovereigns in GCC have been resilient
Mexico Qatar Saudi Arabia Abu Dhabi
South Korea Indonesia Dubai Kuwait
Source: Bloomberg, ADCB
GCC Sovereign: 30-year dollar bond yield
performance
21
5
6
7
8
9
10
11
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-183
0-y
ear
bo
nd
yie
ld (
%)
Bahrain at same levels as Argentina
Turkey Bahrain Oman Argentina Brazil
3
3.5
4
4.5
5
5.5
6
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18
Dubai is trading cheap versus other EM peers
Mexico Qatar Saudi Arabia Abu Dhabi
South Korea Indonesia Dubai
Source: Bloomberg, ADCB
GCC corporate bond performance
22
150
200
250
300
350
400
Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18
GCC credit relatively resilient..
EM Middle East Corp. Bond Index
EM Asia Corp. Bond Index
EM East. Europe Corp. Bond Index
EM EMEA Corp. Bond Index
20
30
40
50
60
70
80
90
100
110
120
125
130
135
140
145
150
155
Jan-14 May-15 Sep-16 Jan-18
USD
/bb
l
..yet more gains could be warranted
GCC credit index (LHS) Brent Crude (RHS)
Source: Credit Suisse Indices, Bloomberg Barclays Indices, Bloomberg, ADCB
GCC CDS performance versus EM
23
70
90
110
130
150
170
190
210
230
250
70
80
90
100
110
120
130
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
)
Bahrain CDS climbed the record highest level
Dubai Saudi Arabia Kuwait
Abu Dhabi Bahrain (RHS) EM average
-60 40 140 240
Qatar
South Korea
Saudi Arabia
Kuwait
Abu Dhabi
Dubai
Czech
Russia
Poland
China
Philippines
Mexico
India
Malaysia
Indonesia
South Africa
Egypt
Brazil
Bahrain
Turkey
Argentina
Change in 5-year CDS (Jan-Jun 2018)
Bahrain has underperformed the most
Source: Bloomberg, ADCB
Chapter III: Credit rating
valuation
GCC sovereigns vs EM peers- 10yr segment
25
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
ColombiaMexico
Chile
Peru
Turkey
Russia
South Africa
Qatar Saudi Arabia
HungaryAbu DhabiPoland
Bahrain
Romania
Kuwait South Korea
China
Indonesia
Philippines
Oman
Argentina
Egypt
Dubai*
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10
-ye
ar y
ield
s
GCC sovereigns trading cheap versus peers
GCC vs EM peers- 30yr segment
26
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
ColombiaMexico
Chile Peru
Turkey
Russia
South Africa
QatarSaudi Arabia
HungaryAbu Dhabi
Bahrain
Romania
South Korea
Indonesia
Oman
Argentina
Egypt
Dubai
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
30
-yea
r yi
eld
s
GCC sovereigns appear cheap versus other EM
GCC CDS versus ratings
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+ B
Brazil
Colombia
Mexico
ChilePeru
Turkey
Russia
South Africa
Qatar Saudi ArabiaDubai*
HungaryAbu Dhabi Poland
Bahrain
Romania
Czech
Kuwait
South KoreaChina
Indonesia
IndiaMalaysia
Philippines
ThailandUK Spain
Italy
France Austria Belgium
Argentina
0
50
100
150
200
250
300
350
400
450
500
CD
S sp
read
s (b
p)
GCC sovereigns have cheapened versus other markets
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
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
GCC Financials credit rating
28
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
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
DIF
C
Ald
ar
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
AAAA-A+
AA-
BBB+BBB
BBB-BB+
BBBB-B+
BB-
CCC+
GCC corporates credit rating
29
Note: The ratings refer to S&P ratings, ** Fitch ratings used as substitute where the corporate/bank not rated by S&P ratings Source: Bloomberg, ADCB
Chapter IV: GCC valuation
analysis
GCC sovereign dollar yield curves
31
BHRAIN 5.875 1/21 BHRAIN 6.125 8/23 BHRAIN 7 10/28BHRAIN 7.5 9/47
OMAN 3.625 6/21 OMAN 3.875 3/22OMAN 5.375 3/27
OMAN 6.5 3/47
4
6
8
10
12
3yr 5yr 10yr 30yr
ADGB 2.125 5/21
ADGB 2.5 10/22
ADGB 3.125 10/27
ADGB 4.125 10/47
DUGB 5.59 6/21DUGB 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 3/27QATAR 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)
32
-10
10
30
50
70
90
110
130
150
170
190
0
1
2
3
4
5
Z-sp
read
(b
ps)
Yiel
d
29-Dec (YC) 28-Jun (YC) 29-Dec (Z-spread) 28-Jun (Z-spread)
Note: YTD change: 29th December 2017 to 28th June 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)
33Note: YTD change: 29th December 2017 to 28th June 2018, , Source: Bloomberg, ADCB
0
50
100
150
200
250
300
350
0
1
2
3
4
5
6
7
Z-sp
read
Yiel
d
29-Dec (YC) 28-Jun (YC) 29-Dec (Z-spread) 28-Jun (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.
Saudi Arabia z-spread and yield curve (YTD
change)
34Note: YTD change: 29th December 2017 to 28th June 2018, , Source: Bloomberg, ADCB
0
50
100
150
200
250
0
1
2
3
4
5
6
Z-sp
read
Yiel
d
29-Dec (YC) 28-Jun (YC) 29-Dec (Z-spread) 28-Jun (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.
Kuwait z-spread and yield curve (YTD
change)
35Note: YTD change: 29th December 2017 to 28th June 2018, , Source: Bloomberg, ADCB
45
55
65
75
85
95
105
115
125
135
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
KUWIB 2.75 3/22 KUWIB 3.5 3/27
Z-sp
read
Yiel
d
29-Dec (YC) 28-Jun (YC) 29-Dec (Z-spread) 28-Jun (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)
36Note: YTD change: 29th December 2017 to 28th June 2018, , Source: Bloomberg, ADCB
200
250
300
350
400
450
500
550
600
650
0
1
2
3
4
5
6
7
8
9
10
Z-sp
read
Yiel
d
29-Dec (YC) 28-Jun (YC) 29-Dec (Z-spread) 28-Jun (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.
Oman z-spread and yield curve (YTD
change)
37Note: YTD change: 29th December 2017 to 28th June 2018, , Source: Bloomberg, ADCB
100
150
200
250
300
350
400
450
500
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
Z-sp
read
Yiel
d
29-Dec (YC) 28-Jun (YC) 29-Dec (Z-spread) 28-Jun (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.
GCC corporate top performers (YTD spread
performance)
38
Note : YTD change: 29th Dec 2017 to 28th June 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
-27-30-34-34-41-42-42-43-43-44-45-46-46-46-48-50-53-59-62-62-68
-383-425
-451-635
-700-600-500-400-300-200-1000
EBIUH 5 ¾ PERPCOMQAT 2 ⅞ 06/24/19
EMIRAT 3 ⅞ 03/19/23 EBIUH Float 03/31/24 DPWDU 1 ¾ 06/19/24
MASQUH Float 11/09/22 MASQUH Float 10/25/22 MASQUH Float 09/19/22 MASQUH Float 09/07/22
WARBAB 6 ½ PERPEBIUH 6 ⅜ PERP
BUBYAN 6 ¾ PERP MASQUH Float 11/09/20 MASQUH Float 06/08/22 MASQUH Float 05/22/22 MASQUH Float 08/29/19 MASQUH Float 02/28/21 MASQUH Float 05/25/20 MASQUH Float 01/18/20 MASQUH Float 10/21/19
EBIUH Float 11/27/23 EBIUH 5 11/27/23
EBIUH Float 05/16/19 KUWAIE 9 ½ 08/04/19 EBIUH Float 02/27/19
Z-spread (bp)
Performance from 29th Dec 2017 to 28th June 2018
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.
GCC corporate bottom performers (YTD spread
performance)
39
Note : YTD change: 29th Dec 2017 to 28th June 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
38394041414343
50535455
61717475
88103
113122
141159
198334335
478
0100200300400500600
FABUH 4.8 09/15/36 AUBKWK 5 ½ PERP FABUH 4.365 08/09/32 FABUH 4.1 09/24/32 OMGRID 3.958 05/07/25 EBIUH Float 08/16/20 KWIPKK 4 ½ 02/23/27 DOLNRG 5.888 06/15/19 KWIPKK 5 03/15/23 BKMBOM 3 ¾ 05/03/21 OMGRID 5.196 05/16/27
KWIPKK 9 ⅜ 07/15/20 EBIUH Float 04/10/19 EBIUH 5.35 07/11/22 BKDBOM 6.85 PERP BATELC 4 ¼ 05/01/20
ADIBUH 6 ⅜ PERP MAFUAE 5 ½ PERP DAMACR 6 ¼ 04/20/22 ALHILA 5 ½ PERP
MAFUAE 7 ⅛ PERP EBIUH Float 03/11/23
EAPART 6 ⅞ 09/28/20ERESQD 4 ⅞ 04/05/22ERESQD 4 ⅜ 05/18/21
Z-spread (bp)
Performance from 29th Dec 2017 to 28th June 2018
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.
GCC Investment Grade corporates (BBB- rated
and above only) YTD spread performance
40
Note : YTD change: 29th Dec 2017 to 28th June 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
-7-8-8-9-13-14-14-15-17-19
-34-41-42-42-46-50-53-68
-383-425
-500-400-300-200-1000
SECO 5.06 04/08/43TAQAUH 3 ⅝ 06/22/21TAQAUH 3 ⅝ 06/22/21
UNBUH Float 02/28/22 EBIUH 4.27 09/28/37 EBIUH 4.27 09/28/37
EBIUH Float 10/12/20 EBIUH Float 01/26/20
MAFUAE 4 ½ 11/03/25 EIBUH 3.542 05/31/21 EBIUH Float 03/31/24 DPWDU 1 ¾ 06/19/24
MASQUH Float 11/09/22 MASQUH Float 10/25/22 MASQUH Float 11/09/20 MASQUH Float 08/29/19 MASQUH Float 02/28/21
EBIUH Float 11/27/23 EBIUH 5 11/27/23
EBIUH Float 05/16/19
Top performers..
Z-spread (bp)
353536363737383840414141
5050
545555
7174
198
050100150200
RASGAS 5.838 09/30/27 RASGAS 5.838 09/30/27 MAFUAE 5 ¼ 07/05/19 EBIUH Float 06/23/21 TAQAUH 6 ½ 10/27/36 TAQAUH 6 ½ 10/27/36 GULINT 3 ½ 03/25/22 FABUH 4.8 09/15/36 FABUH 4.365 08/09/32 FABUH 4.1 09/24/32 OMGRID 3.958 05/07/25 OMGRID 3.958 05/07/25 DOLNRG 5.888 06/15/19 DOLNRG 5.888 06/15/19 BKMBOM 3 ¾ 05/03/21 OMGRID 5.196 05/16/27 OMGRID 5.196 05/16/27 EBIUH Float 04/10/19 EBIUH 5.35 07/11/22 EBIUH Float 03/11/23
..bottom performers
Z-spread (bp)
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.
GCC High Yield corporates (rated BB+ and
below only) YTD spread performance
41
Note : YTD change: 29th Dec 2017 to 28th June 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
478
335
159
122
113
88
54
41
41
-13
-18
-451
-600-400-2000200400600
ERESQD 4 ⅜ 05/18/21
ERESQD 4 ⅞ 04/05/22
MAFUAE 7 ⅛ PERP
DAMACR 6 ¼ 04/20/22
MAFUAE 5 ½ PERP
BATELC 4 ¼ 05/01/20
BKMBOM 3 ¾ 05/03/21
OMGRID 3.958 05/07/25
OMGRID 3.958 05/07/25
FABUH 5 ¼ PERP
DAMACR 4.97 04/09/19
KUWAIE 9 ½ 08/04/19
Z-spread (bp)
Performance from 29th Dec 2017 to 28th June 2018
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.
UAE financials YTD spread performance
42
Note : YTD change: 29th Dec 2017 to 28th June 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
141103
15-11
-18-19
-42
-42-43-43-46-46-48-50
-53-59-62-63
-100-50050100150200
ALHILA 5 ½ PERPADIBUH 6 ⅜ PERP
CBDUH 4 11/17/20
NOORBK 6 ¼ PERP DIFCAE 4.325 11/12/24 EIBUH 3.542 05/31/21
MASQUH Float 11/09/22 MASQUH Float 10/25/22 MASQUH Float 09/19/22 MASQUH Float 09/07/22
MASQUH Float 11/09/20 MASQUH Float 06/08/22 MASQUH Float 05/22/22 MASQUH Float 08/29/19 MASQUH Float 02/28/21 MASQUH Float 05/25/20
MASQUH Float 01/18/20 MASQUH Float 10/21/19
Z-spread (bp)
Performance from 29th Dec 2017 to 28th June 2018
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.
43
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
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on or use the information contained in the publication should independently verify and check the accuracy, completeness, reliability and suitability of the
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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
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
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