Credit default swaps linked to Dubai fell to the lowest since state-owned Dubai World sought to delay debt repayments in November as investors gain confidence in the emirate’s economic recovery and global stocks rallied.
Default swaps tied to Dubai government debt narrowed 32 basis points to 385.74 yesterday, the lowest close since Nov. 24, according to data compiled by Bloomberg. The five-year contracts rose to a record 977 basis points in Feb. 17, 2009, before the United Arab Emirates’ central bank bought $10 billion of Dubai bonds.
Dubai World, one of the emirate’s three main state-owned business groups, said Nov. 25 it would seek to delay repaying loans until at least May 30. The announcement sparked a plunge in developing-nation stocks and the largest increase in emerging-market bond yields over U.S. Treasuries in four weeks. The cost to protect against a default by Dubai doubled.
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