Key insights
- Bahrain's bonds rallied due to regional support and a US-Iran truce, despite war-related challenges. The Central Bank of Bahrain implemented liquidity measures, including a currency swap with the UAE and loan deferrals. While positive for Bahrain, the impact on US equities is slightly negative, reflecting increased geopolitical risk and potential for contagion, though contained by regional support.
Investing.com -- Bahrain’s bonds have rallied following a two-week truce between the US and Iran, with intermediate and long-end securities seeing option-adjusted spreads tighter than pre-war levels, according to Bloomberg Intelligence fixed-income strategist Basel Al-Waqayan.
The Persian Gulf nation, which hosts the headquarters of the US Naval Forces Central Command, faced missile and drone attacks after the Iran war broke out on Feb. 28. The conflict compounded existing challenges, including a debt burden of about 140% of gross domestic product and limited reserves.
Local funding channels remained operational during the conflict. The Central Bank of Bahrain reported that Treasury-bill issuances were fully or over-subscribed last month. A sukuk sale on April 6 was oversubscribed by 225%.
On April 8, Bahrain’s central bank and its UAE counterpart signed a five-year, 20 billion dirham ($5.4 billion) currency-swap agreement, providing Bahrain’s commercial lenders with access to additional liquidity.
On Monday, Bahrain’s central bank announced additional support measures for lenders, including loan deferrals. The bank will provide retail banks with unlimited dinar liquidity for six months, matched by eligible collateral up to a current limit of 7 billion dinars ($18.6 billion).
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