Dubai's default risk fell to the lowest level since Dubai World announced its debt restructuring in 2009, as Emirates Airline sold bonds and local entities reach debt accords.
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The cost of protecting Dubai's debt against default dropped to 324 basis points today, according to data provider CMA at 9:50am in London. The five-year credit default swaps surged from 325 basis points on November 24, 2009 to 655 three days later after Dubai World announced plans to restructure about $25 billion (Dh91.82bn).
"The Emirates bond was a factor in the tightening of the CDS, because of the demand and its pricing," Usman Ahmed, the head of fixed income at Dubai-based Emirates NBD Asset Management, a unit of the United Arab Emirates' biggest bank, said today. "It helped re-price the Dubai curve. The demand for Emirates' bond showed confidence returning to Dubai's debt market."
The world's biggest airline by international traffic sold $1bn of five-year bonds yielding 330 basis points over the benchmark mid-swap rate yesterday. State-owned Dubai World reached a final agreement with its lenders in March, while Dubai Holding LLC and property developer Nakheel PJSC are in talks with creditors to restructure a total of about $20 billion.
The yield on Dubai government's 6.7 per cent bond maturing October 2015 declined three basis points, or 0.03 percentage point, to 5.14 per cent at 12:22pm in Dubai, the lowest since May 19, according to Bloomberg composite prices.
CMA is owned by CME Group and compiles prices quoted by dealers in the privately negotiated market.
Bloomberg News