Anita Yadav - Head of Fixed Income Research
Published Date: 08 May 2018
The US Federal Reserve left benchmark interest rates unchanged last month, though futures implied probability of a rate hike in June is almost 100%. Boosted by solid economic data releases, UST yield curve shifted upwards last month with some steepening in the shorter end of the curve. Yields on 2yr, 5yr, 10yr and 30yr treasuries closed the month of April at 2.49% (+22bps m/m), 2.80% (+24bps m/m), 2.95% (+21bps m/m) and 3.12% (+15bps m/m) respectively.
Rising benchmark yields caused substantial losses for sukuk portfolios globally. Total return on Markit iBoxx Emirates NBD USD Sukuk index for the month of April was a loss of -0.64%. Excluding the benefit of coupon collection, the return on index would have been a loss of -0.99%. That said, this compares favourably with total loss of -1.02% on emerging market USD denominated bonds index during the same period.
Looking at current yields, following relative value observations are made:
In the sovereign sector :
Source: Markit, Emirates NBD Research
Global Sukuk: Relative Value
Bahrain Debt Update
Relative Value in Sukuk as at April 2018
GCC credit spreads widened further
US producer inflation rises