Dubai’s economy may still be in the doldrums, but investors are becoming increasingly optimistic that the credit-laden city-state will manage to avoid defaulting on its international debt.

The price of state-owned developer Nakheel’s $3.5bn Islamic bond maturing in December has risen from a low of 63.5 cents to the dollar in February to more than 90 cents in August. Other sovereign and corporate bonds in the emirate have also done well, rallying across the board.