Turmoil spreads to sovereign debt
UAE and Saudi bonds fall
Oil price down to $60 per barrel
Dollar-denominated sovereign bonds of Middle East and North African countries slid on Monday as President Donald Trump took effective US tariff rates to their highest in more than a century, causing steep declines in global stock markets and a flight to safety in US government debt.
Saudi Arabia’s stock index tumbled to a 17-month low in early Monday trading before rebounding slightly, while equities worldwide have been routed on fears that Washington’s moves will spark a global recession.
The turmoil spread to Mena sovereign debt, although bonds are generally less volatile than stocks because they offer more predictable returns and lower risk.
UAE and Saudi Arabia government bonds fell 0.5 and 1.6 percent respectively, while a $4.5 billion Kuwaiti government 10-year bond declined to 97.6, easing from Thursday’s six-month high. Bond prices begin at a par value of 100.
In contrast, US 10-year treasury bond yields fell to 3.97 percent, a six-month low. Bond yields are inversely correlated to prices, so the falling yield shows increased buying demand from investors for the safe-haven asset. The price of 10-year treasury bonds was up 0.8 percent on Monday.
On average, Gulf governments count on oil for at least half their revenue. From a high this month of $72.3 dollar per barrel, crude oil WTI prices have plunged more than 15 percent and are hovering around $60 per barrel now, their lowest since February 2021.
An Egyptian 30-year, $2 billion bond maturing in 2047 plunged 4.2 percent to 67, taking its losses to 12 percent since April 1. Tunisian central bank debt slipped to a four-week low of 97.
Effective tariff rates are tariffs as a percentage of imports. In the US, these have now risen ten-fold, from 2.5 percent before the US presidential election in November to 25 percent now.
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