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Dubai: US treasuries rallied sharply last week, and credit markets turned more bearish, as concerns over writedowns at banks and other financial companies resurfaced.
SEC requirements for greater transparency of investment bank capital and liquidity positions was taken negatively by the market, weighing down on fin-ancial stocks in mid-week.
In addition, American insurer AIG reported a first quarter loss greater than estimated as a result of $15 billion in writedowns, and announced that it would need to raise $12.5 billion from the markets.
Although actions by the Fed and other central banks have eased the liquidity crisis, the market is now coming to the realisation that the difficulties in the financial sector are far from over.
This weaker tone was mitigated by buying from both GCC and European funds.
In the past such news would have led to significant widening of credit spreads, however, the robustness of the GCC financial sector meant that any weakness has been viewed as a buying opportunity by investors.
This helped the HSBC/DIFX Sukuk and GCC Aggregate Indices both close the week relatively flat.
In addition, much of the previous week's rally was based on short-covering, but the stability of the rally led to accounts that have been underweight to begin redeploying funds on the back of a more positive overall trend.
Issues receiving specific attention in the market currently are the "Dubai Inc" deals that had previously been caught up in the recent global credit selloff, specifically DP World 2017, Dubai Holding 2012 and DIFC12 that all offer yields in excess of 4.75 per cent.
Ras Al Khaimah announced a new benchmark dirham-denominated five-year deal with price whispers in the E+100 to 110 basis points area and is expected to launch this week.
This brings yet another deal to the growing universe of local currency deals, hot on the heels of the Nakheel and Government of Dubai deals.
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