Dubai returns to fixed income sphere

October 28, 2009

Dubai returns to the fixed-income sphere for the first time in more than a year after raising about $2 billion from dirham and dollar-denominated Islamic bonds.

Confidence in the emirate had run aground earlier this year as investors bet on Dubai’s state-linked entities not being able refinance debt. So far, this year it has met all its obligations and with the fresh issue booking about $6.5 billion from regional and international investors, Dubai’s doomsday scenario appears to be vanishing. 

With much of the United Arab Emirates’ oil coming from the largest of the emirates Abu Dhabi, investors have flocked to the capital this year as appetite for good emerging market debt revives. The spread between Abui Dhabi and Dubai widened at its peak to over 500 basis points in February, but Dubai government efforts to restore confidence — kickstarted by the UAE central bank buying $10 billion of its bonds — has helped spreads narrow to about 200 basis points.

Dubai still has a long way go. The next test will be property developer Nakheel resolving its $3.5 billion Islamic bond maturing on Dec. 14 and then a raft of debts in 2010…..but as Harold Wilson once said, “A week’s long time in politics.”  

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[…] In a short, round-the-world sweep, “emerging economies” are doing well: a Polish company has raised €1.4bn, €400m more than first expected, at Europe’s largest IPO this year; Tunisia is benefiting unexpectedly as European manufacturers move production to the country; Malaysia is opening its protected car industry to foreign producers, and offering incentives for production of green cars; Tanzanian farmers are encouraged to move from subsistence to commercial farming in a $300m German-funded UN programme that aims to give the farmers market access; Gulf companies show signs of recovery and Dubai returns to the world of fixed income. […]

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