Global Sukuk Snapshot: Jan 2021
Global Market Commentary
The United States (“US”) Treasuries (“UST”) market had a weak start to the new year, with 10-year yields breaking the psychological 1.00% mark to touch 1.19%, the highest level since March 2020. This was triggered by the Democratic party’s win at the Georgia state senate run-off elections on 5 January 2021, which gave Democrats a simple majority in the US Senate, paving the way for potentially higher fiscal stimulus. Yields were also pressured higher after President Biden unveiled his proposed $1.9 trillion rescue package plan. During the month, the shorter end of the UST yield curve edged lower by 1 to 2 basis points (“bps”), while yields on the longer end rose by 11 to 20bps, causing the curve to shift higher and bear steepen. Month-on-month (“m-o-m”), benchmark 10-year UST yields closed the month 16bps higher from 0.91% at end-December 2020 to 1.07% at end-January 2021.
Meanwhile, Brent crude oil prices continued to recover, posting gains of 8.1% m-o-m from $51.72/barrel (“bbl”) at end-December 2020 to $55.89/bbl at end-January 2021. Gains were mostly driven by Saudi’s surprise announcement on 5 January 2021 to voluntarily cut output by 1 million barrels per day in February 2021 and March 2021, as part of a deal under which most the Organisation of the Petroleum Exporting Countries+ (which includes other members outside OPEC such as Russia, Kazakhstan and Mexico) (“OPEC+”) producers will hold production steady in the face of new coronavirus lockdowns. Following the OPEC+ meeting, Brent crude oil prices continued to extend gains to touch $57.42/bbl on 13 January 2021, the highest level since February 2020, boosted by a weak dollar and bullish signals from Chinese import data. In the second half of the month, Brent crude oil prices traded within a narrow range of $54.5/bbl to $56.5/bbl due to a lack of fresh catalysts, before ending the month at $55.89/bbl.
First Abu Dhabi Bank (“FAB”) has issued a five-year Sukuk facility worth $500 million at 90bps over midswaps through FAB Sukuk Company which was three times oversubscribed, a press release read. The Sukuk facility received strong demand from Islamic and conventional investors in the United Kingdom, Europe, Middle East and Asia, recording a total orderbook of $1.5 billion.
Saudi’s National Debt Management Center in a statement announced that its SAR220 billion ($58.59 billion) 2020 financing plan has been completed. The finance ministry also concluded its local Sukuk issuance for the month of December 2020: SAR11.72 billion ($3.12 billion) in bids were received; however, none of these requests have been allocated due to the conclusion of 2020’s domestic funding.
Source: : Bloomberg, Islamic Finance News, Reuters (as of 31 January 2021)
Data shown is in US Dollar unless otherwise noted.
DJSUKTXR | Dow Jones Sukuk Index
JPEIGLBL | JP Morgan EMBI Global Total Return Index
Source: Bloomberg as at 31 January 2021
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