Can the Gulf’s bond rally last?

The impressive rally in dollar-denominated bond markets across the GCC over the past year has seen yields in Qatar and Abu Dhabi hit record lows in recent months, while even those in debt-ridden Dubai and crisis-hit Bahrain have fallen sharply. Looking ahead, the continued low level of US Treasury yields should provide a strong anchor for bond markets across the GCC over the next year or so. But if global investor sentiment appetite starts to sour in 2013 – as we fear – widening spreads could put upward pressure on overall yields, particularly in Dubai and Bahrain.