The cost of insuring Dubai’s sovereign debt has become almost as expensive as insuring troubled Iceland, illustrating the depth of investor concern about a default by the emirate.
The spread on Dubai’s benchmark five-year credit default swaps last week broke the 1,000 basis points barrier, similar to the spread of Icelandic bonds.
It is now twice the level of the CDS spread of Dubai’s peers in the Gulf, reflecting concerns that the real estate and trade hub is more prone to a global slowdown than its oil-rich neighbours. While illiquid, the CDS market sheds light on market sentiment and feeds into the cost of issuing new debt.
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