Dubai bonds rose to the highest in a week after the government ordered the United Arab Emirates’ biggest lender to take over an unprofitable rival as the emirate consolidates its banking system.
The increase pushed the yield on Dubai government’s 5.591 percent dollar bond down five basis points yesterday to 6.30 percent, the lowest since Oct. 3. Emirates NBD PJSC, the country’s biggest lender by assets, said it will take over government-controlled Islamic lender Dubai Bank PJSC. The cost to insure Dubai’s debt against default dropped to the lowest in almost three weeks.
“The news is a small positive as further consolidation in the banking sector is required,” said Emad Mostaque, a London- based Middle East and North Africa strategist at Religare Capital Markets Plc. “Comments by Emirates NBD indicate that the structure of the acquisition and government support will ensure minimal impact on Emirates NBD’s results.”
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