MENA debt issuances total $111 bln in 2019, up 17.6% y/y
Global fixed-income markets continue positive momentum in last quarter of 2019
Report prepared by NBK Capital
KUWAIT CITY, Jan 27: Global fixed-income markets continued their positive momentum in the last quarter of 2019 as a coordinated global tightening policy from major Central Banks created a positive backdrop for the asset class. As anticipated, the US Federal Reserve cut its policy rate by 25 basis points (bps) during the meeting in October. This has brought the total number of cuts for the year to three, and lowered the policy rate by 75bps, to a range of 1.50%-1.75%.
The reference yield on 10-year US treasury treasuries closed the quarter at 1.92%, up 25bps as risks around the US-China trade conflict receded following the announcement of the Phase 1 trade deal. The deal is expected to result in the cancellation of previously scheduled tariffs.
Notwithstanding the yield rise in Q4, the reference yield on the 10year US treasuries closed 77bps lower on a year-to-date basis.
In the fourth quarter of 2019, all central banks in the GCC reduced their policy rates by 25bp, following the Federal Reserve’s steps.
Investment grade sovereign issuers in MENA saw their 5-years risk premium tightening by 18bps on average in the fourth quarter. The equivalent spread declined by a larger amount for sub-investment grade countries: CDS of Bahrain and Oman dropped by 60 and 90bps respectively during the same period. The risk premium of all GCC countries declined in 2019 as perceived risk in the region receded.
GCC inclusion in the JP Morgan Emerging Market Bond Index was arguably the larger catalyst for regional fixed-income performance in 2019. The inclusion of the sovereign debt of five GCC countries attracted new inflows and improved the liquidity of regional debt market. Regional fixed-income markets performed in line with their global peers during the year.
MENA entities borrowed a total amount of USD 18.2 billion in Q4. The financial sector dominated primary deals representing around 65% of total volume while governments contributed to 35%. Overall, total issuances in the 2019 reached a record level of USD 111.2 billion, an increase of 17.6% when compared to 2018. Issuances were met with a strong demand from a growing investor base and performed relatively well in the secondary market.
NBK launched a USD 750 million AT1 perpetual bond with a coupon rate of 4.50%
KIPCO borrowed USD 500 million in 7-year senior bond issuance with a coupon rate of 4.23%
The Saudi Arabian Government borrowed USD 2.5 billion with a 10-year sukuk deal. The issuance has a profit rate of 2.97%
Dar Al-Arkan issued a 6-year USD 600 million sukuk with a profit rate of 6.75%
Arabian Centres borrowed USD 500 million in a debut 5-year sukuk with a profit rate of 5.38%
The Abu Dhabi Government owned Mubadala raised USD 3.5 billion in a three-tranche bond transaction with maturities 5, 10, and 30 years. Another Abu Dhabi related entity, Aldar, borrowed USD 500 million in a 10-year Sukuk deal with a profit rate of 3.88%
Sharjah Government issued a 10-year USD 750 million Sukuk with a profit rate of 3.23%
Majid Al Futtaim Properties borrowed USD 600 million with an 11-year Sukuk deal. The issuance has a profit rate of 3.93%
Dubai Islamic Bank raised USD 750 million in a 6-year Sukuk with a profit rate of 2.95%
Masraf Al Rayan borrowed USD 500 in a 5-year Sukuk deal. The issuance has a profit rate of 3.02%
The Egyptian Government raised USD 2 billion in a 3-tranche deal, with maturities at 2023, 2032 and 2059. The deals have coupon rates of 4.55%, 7.05% and 8.15%, respectively.