Dubai government bond yields tumbled the most in four weeks after the Gulf emirate pledged to halve its 2012 budget deficit as state companies confront $15.5bn in debt maturing this year.
The sheikhdom, which was on the brink of default in 2009, said Dec 25 it aims to reduce spending this year by 4.2 percent, narrowing the shortfall to AED1.83bn ($498m), or 0.6 percent of gross domestic product, from a 2011 target of AED3.78bn. Since, the yield on the government’s 7.75 percent bond due October 2020 fell 36 basis points, or 0.36 percentage points, to 6.92 percent.
“A conservative budget puts the authorities in a good position heading into 2012,” Khatija Haque, a senior economist at Emirates NBD, the UAE’s biggest bank by assets, said by email. “The authorities are confident that all the financial obligations will be met next year.”
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