The Emirate of Abu Dhabi’s super tight bond pricing last week — which included a 10 year tranche reoffered at a record breaking 18bp over US Treasuries — has raised the question of whether the bid for high grade dollar bonds from non-US issuers is big enough for an EM bond, most likely from a Gulf sovereign, to be priced inside Treasuries.
This is, of course, less of a reflection on perceptions of US public debt and creditworthiness — although they doubtless play some part as will the volumes that the US government issues, which dwarfs what is issued in the Gulf — and more a consequence of technical factors.
Abu Dhabi carries zero risk-weighting for Middle East banks and is considered a risk-free asset — just like Treasuries but arguably with the benefit of greater local appeal.
International investors will be aware of that and will be happy to ride on the locals’ coattails, in the same way they will buy sukuk at a…
