Abu Dhabi Bond Near High Helped by Flight to Safety: Arab Credit - Bloomberg

Investors are shunning equity markets in the United Arab Emirates and turning to Abu Dhabi’s investment-grade bonds on concern Europe will struggle to contain its debt crisis.

The yield on Abu Dhabi government’s 5.5 percent dollar bond maturing April 2014 fell to a record 1.31 percent on Sept. 19, according to prices compiled by Bloomberg. The debt yielded 1.52 percent yesterday. The rate is 328 basis points, or 3.28 percentage points, below the average yield on sovereign debt in the Middle East, the HSBC/NASDAQ Dubai Middle East Conventional Sovereign US Dollar Bond Index shows. Abu Dhabi’s benchmark stock index closed at the lowest level in almost seven months.

Abu Dhabi, which has the third-highest investment grade at Moody’s Investors Service, is home to about 7 percent of the world’s proven oil reserves and one of the biggest sovereign wealth funds. Crude oil prices have averaged about 20 percent more this year than in 2010, according to data compiled by Bloomberg. The emirate and the U.A.E.’s central bank supported Dubai with $20 billion during the global credit crisis.

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