LOCAL BUSINESS Oman the weakest GCC link as yields rise

dubai — A surge in Oman’s international bond yields suggests that, with investor concerns about its twin deficits growing, the country is fast replacing Bahrain as the weak debt market link among Gulf oil exporters.

Oman’s January 2023 dollar bond yield has jumped 81 basis points (bps) since end-September, making Oman by far the worst performer in the GCC.

Saudi Arabia, the second worst, has seen its March 2023 bond yield rise just 44bps.

Part of Oman’s underperformance is technical.

Oman is the only GCC state in JP Morgan’s emerging market government bond indexes; the investment bank will add the other 5 in 2019. That is prompting buying of those countries’ debt in anticipation of money inflows.

But another reason is Oman’s fiscal and external deficits, and its modest progress in taming them.

“Risks are increasing with lower oil prices and increased government spending, but they are still manageable for the time being,” said Mohieddine Kronfol, chief investment officer for global sukuk and Mena fixed income at Franklin Templeton Investments.

“Pressure on the government to address the fiscal deficit and mounting debt levels will continue, and accelerate, if oil prices decline further or progress remains underwhelming.”

Bahrain, which also runs twin deficits, was for years seen as the most fragile GCC member. But that began changing in October following a $10 billion aid package from Saudi Arabia, the UAE and Kuwait.