Qatar National Bank is planning to tap the international bond market today, extending a record-breaking year of issuance for the group.
The bank is set to issue a 5-year bond of at least $500m, adding to what has already been a record year of issuance for the group. Gulf banks have been piling into the bond market this year to compensate for the squeeze delivered by weak oil prices, writes Joel Lewin.
The bank has already issued $25bn worth of bonds so far this year, up from $21.5bn during the whole of 2015, according to Reuters data.
Plunging rates in developed markets – some $13tn of global bonds now have negative yields- have driven investors to pile into emerging market debt this year, helping to push down yields and support record levels of borrowing.
It’s been a record year of debt sales for Middle Eastern governments, as they tap bond markets to prop up public finances weakened by the prolonged slump in oil prices.
A recent rebound in oil prices, which are up 15 per cent this month, has raised the prospect that investors could become more amenable to hoovering up even more of this debt.
In May, Qatar’s government sold a record $9bn worth of international bonds, the biggest ever Middle Eastern bond sale.
At the end of 2015, Qatar’s debt to GDP ratio was 39.9 per cent, the highest in a decade.
Tim Ash at Nomura says “the floodgates” could be about to open for Middle East bond issuance as “the region takes advantage of a window provided by the uptick in oil prices to get deals done.”
It will be interesting to see how the market digests this and when we see the tipping point. As yet EM investors are relatively flush with cash as money has poured back into the asset class helped by negative rates on $13trn of DM investments, and a relative lack of new issuance elsewhere in EM (Russia has effectively been out of the market with sanctions over the past two years).
We probably have a month or so, until the market has its fill of new issuance and investors begin to lighten up this side of US elections which could throw up more challenging times ahead – Clinton likely more/earlier Fed tightening, and Trump the shear unpredictability of policy but if protectionism kicks in could see EM badly impacted by a marked drop in global trade.
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