Dubai bond and sukuk yields spiked yesterday in the worst day of trading for the emirate's government debt in more than 18 months, with some brokers triggering margin calls for highly leveraged investors.
The yield on the Dubai Government's 10-year sukuk, launched in January with a profit rate of 3.875 per cent, soared 22.5 basis points to 4.972 per cent. Bond yields move in the opposite direction from price.
At the time it was sold, the Government was able to borrow for 10-year capital at a cheaper rate than Italy - which is now trading with a yield of 4.73 per cent.
Dubai's Islamic bonds launched in January have now added 105.9 basis points since the Federal Reserve first discussed tapering its monthly bond purchases last month.
"The markets have reacted pretty aggressively and negatively," said Chandru Bhatia, a portfolio manager at Rasmala Investment Bank.
"We're still not buyers - we're not stepping into the market and we're on the sidelines."
Although some yields on Dubai debts were now starting to look "attractive", a period of stability would be needed before more buyers stepped in, Mr Bhatia added.
Yields on Dubai's10-year bonds, which have outperformed sukuk during the past month, rose 31.1 basis points to 4.866 per cent yesterday, the worst day of trading since October 2011.
Stock markets pared much of their year-to-date gains, with the Dubai Financial Market General Index falling as much as 5.1 per cent before rallying to close down 1.9 per cent at 2,255.97. It was the third consecutive day of declines for the index.
The Abu Dhabi Securities Exchange General Index fell 1.8 per cent before paring losses to close down 1 per cent at 3,526.54.
"Some stock-brokerage companies went aggressive on margin," said Mohammad Al Mortada Al Dandashi, managing director of Al Ramz Securities in Abu Dhabi.
ghunter@thenational.ae
* additional reporting by Hadeel Al Sayegh
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UAE currency: the story behind the money in your pockets
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1: Commit to countering all types of terrorism and extremism in all their manifestations
2: Denounce violence and the rhetoric of hatred
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Haemoglobin disorders explained
Thalassaemia is part of a family of genetic conditions affecting the blood known as haemoglobin disorders.
Haemoglobin is a substance in the red blood cells that carries oxygen and a lack of it triggers anemia, leaving patients very weak, short of breath and pale.
The most severe type of the condition is typically inherited when both parents are carriers. Those patients often require regular blood transfusions - about 450 of the UAE's 2,000 thalassaemia patients - though frequent transfusions can lead to too much iron in the body and heart and liver problems.
The condition mainly affects people of Mediterranean, South Asian, South-East Asian and Middle Eastern origin. Saudi Arabia recorded 45,892 cases of carriers between 2004 and 2014.
A World Health Organisation study estimated that globally there are at least 950,000 'new carrier couples' every year and annually there are 1.33 million at-risk pregnancies.
