Saudi CDS widens ahead of bond issue

Dubai: The cost of insuring exposure to Saudi Arabia risk for a five-year period widened by 8 basis points ahead of its bond issue as investors increased hedging bets.

The five-year Saudi Credit-Default (CDS) Swaps jumped to 160 basis points on Tuesday compared to 152 basis points last Monday, data showed.

“This accounted for their large new public bonds that the kingdom is likely to raise in the near future,” Anita Yadav, head of fixed income at Emirates NBD.

Saudi Arabia is planning to come out with an international bond issue of a significant amount in a few weeks as it prepares to plug its deficits. Investors prefer to hedge themselves for non-payment ahead of the bond issue. Meanwhile, US dollar-Saudi riyal forwards jumped to its highest level since mid-February.

The CDS in Dubai and Abu Dhabi largely remained unchanged despite oil prices softening slightly. CDS for Dubai and Abu Dhabi widened by 2 basis points, almost unchanged.

Abu Dhabi, Dubai CDS was at 95 basis points and Dubai was placed at 220 basis points.

Interbank liquidity has remained unaffected by any external factors, with 3-month Eibor (Emirates Interbank Offered Rate) and Saibor (Saudi Arabian Interbank Offered Rate) at 1.11 per cent and 2.14 per cent respectively.