Global Sukuk Snapshot: Nov 2020

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Global Market Commentary

In November 2020, the 10-year United States (“US”) Treasury (“UST”) yields started the month on a shaky footing as investors switched between risk-on and risk-off modes amid uncertainties surrounding the US presidential elections, as well as positive vaccine development news. However, UST yields subsequently trended lower, as investors shifted their focus to escalating Coronavirus disease 2019 cases in the US and Europe, which continue to weigh on economic growth prospects. During the month, UST yields plunged by 1-9 basis points (“bps”) across the board and led by the longest 30-year tenure, causing the yield curve to shift slightly lower and bull flatten. Month-on-month (“M-o-m”), the benchmark 10-year UST yields closed the month 4bps lower from 0.87% at end-October 2020 to 0.83% at end-November 2020. Meanwhile, Brent crude oil price recovered from previous month’s losses, posting handsome gains of 27.70% m-o-m from $37.45/barrel (“bbl”) at end-October 2020 to $47.84/bbl, driven by positive vaccine development news.

Meanwhile on the demand side, China remains a bright spot for global demand, with authorities raising the quota for use of foreign oil by non state entities by more than 20.00% for 2021. As the first major country to rebound from the pandemic, China’s economic recovery is expected to outpace other countries. In October 2020, China’s retail sales jumped from 3.30% in September 2020 to 4.30% year-on-year, as consumers grow more confident about spending as Covid-19 infections are largely under control. On 25 November 2020, Moody’s upgraded Saudi Electricity Co credit rating from A2 to A1. The rating upgrade reflects Moody’s revised assumption of government support from “High" to "Very High", under the methodology for Government-Related Issuers, in which a proposed new regulatory framework by the government is set to be implemented on 1 January 2021.

Sukuk News

The Indonesian government has raised IDR12.35 trillion ($841.49 million) from a sovereign Shariah securities auction on the 27 October 2020 featuring five reopenings. According to a statement, the auction generated IDR20.9 trillion ($1.42 billion) in bids. The Shariah securities have maturity dates ranging from the 4 April 2021 to the 5 October 2046.

Dubai Islamic Bank (“DIB”) has issued a $1 billion perpetual additional Tier 1 Sukuk with a profit rate of 4.63%, the lowest-ever yield achieved by any bank globally on an additional Tier 1 Sukuk issuance. According to a statement from the bank, the Sukuk issuance, which was oversubscribed 5.7 times with over $5.5 billion in orders, is also the only additional Tier 1 Sukuk to come out of the Gulf Cooperation Council region in 2020. DIB, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, Sharjah Islamic Bank and Standard Chartered arranged the transaction.

Source: Bloomberg, Islamic Finance News, Reuters (as at 30 November 2020)

Data shown is in US Dollar unless otherwise noted.

Graph

DJSUKTXR | Dow Jones Sukuk Index
JPEIGLBL | JP Morgan EMBI Global Total Return Index
 

Issuances

Source: Bloomberg as at 30 November 2020

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