mashreq Fixed Income Trading Daily Market Update Monday, January 4, 2015 Page 1 Market Update Oman sets plan to halve oil's role in economy Oman's government has released a five-year plan to halve the economy's dependence on the oil industry as low crude prices pressure government finances. The 2016-2020 plan, set out in a statement by the Supreme Council for Planning on Saturday, said over 500 programmes and policies would seek to diversify the Omani economy into sectors such as manufacturing, mining, transport and tourism. The plan aims to cut the oil industry's contribution to gross domestic product to 22% from 44%; the contribution of natural gas would drop to 2.4% from 3.6%. Average annual investments would total around 28% of gross domestic product; cumulative investment over the five years is expected to be 41 billion rials (USD106 billion), against 38 billion rials envisaged in the previous five-year plan. The new plan is to make heavy use of public-private partnerships, with 52% of total investment to come from the private sector against 42% in the last plan. The plan assumes an average oil price of USD 45 a barrel for 2016, USD 55 for 2017 and 2018, and USD 60 for 2019 and 2020, while Oman's average oil production is assumed to remain flat at 990,000 barrels per day. The figures assume that Oman will continue running a state budget deficit throughout the plan. Last week, the government announced plans to cut its deficit to 3.3 billion rials this year from an actual 4.5 billion rials last year, partly through big spending cuts. (Reuters) Saudi Arabia cuts ties with Iran after Tehran embassy attack Saudi Arabia cut ties with Iran and expelled the Islamic Republic’s diplomats, a day after its embassy in Tehran was attacked to protest the Saudis’ execution of a prominent Shiite cleric. Iran’s ambassador in the kingdom has 48 hours to leave, Saudi Foreign Minister Adel al-Jubeir said late Sunday in Riyadh. “Saudi Arabia will no longer deal with a country that supports terrorism and sectarianism, ” he said. Iranian protesters set fire to the Saudi Embassy in Tehran. The move marks the biggest crisis in relations between the regional powers since the late 1980s, when the Sunni-led kingdom suspended ties with Shiite-ruled Iran after its embassy was attacked following the death of Iranian pilgrims during Hajj in Mecca. Al-Jubeir announced the expulsion after Iranian protesters set the Saudi embassy on fire following the execution of Nimr al-Nimr, a critic of the kingdom’s treatment of its Shiite minority. He was one of 47 men executed for offenses that included terrorism and political activism. Iran’s Supreme Leader Ayatollah Ali Khamenei warned of repercussions and protesters armed with rocks and firebombs attacked the Saudi embassy in Tehran on Saturday and set parts of the building on fire. (Bloomberg) Iran says its planned boost in oil exports won’t damage market Iran is trying to regain its lost share of global crude sales and has no intention of harming the oil market with its planned increase in production once sanctions are lifted from its economy, Oil Minister Bijan Namdar Zanganeh said. “The oil ministry intends to boost Iran’s crude oil exports by an aggregate of 1 million barrels a day in two phases,” Zanganeh said, according to the official Islamic Republic News Agency. In the first phase, Iran will raise exports by 500,000 barrels a day within a week after the removal of international sanctions, he said Sunday. The country will add another 500,000 barrels a day in a second phase within six months after the curbs end, Zanganeh said. Brent crude slid 35% last year as the Organization of Petroleum Exporting Countries raised output in the face of already rising global stockpiles. Saudi Arabia, the world’s largest crude exporter, has led OPEC in fighting for market share against higher-cost producers such as shale drillers in the U.S. The group set aside its output target of 30 million barrels a day at a meeting in Vienna last month. (Bloomberg) Biggest economies face USD 7 trillion debt refinancing in 2016 The amount of debt that the governments of the world’s leading economies will need to refinance in 2016 will be little changed from last year as nations make strides in cutting budget deficits to a third of the highs seen during the financial crisis. The value of bills, notes and bonds coming due for the Group- of-Seven nations plus Brazil, China, India and Russia will total USD 7.1 trillion, compared with USD 7 trillion in 2015 and down from USD 7.6 trillion in 2012. Japan, Germany, Italy and Canada will all see redemptions fall, while the U.S., China and the U.K. face increases. The amount of maturing debt has gradually fallen since Bloomberg began collating the data in 2012. The decline may bring some support to the bond market as the U.S. Federal Reserve gradually raises interest rates, pushing yields up from record lows. Budget deficits are forecast by economists to narrow for a seventh straight year in 2016 as governments continue to cut back on the extra spending put in place to combat the global financial meltdown. (Bloomberg) China two-speed economy stays intact as manufacturing slumps China’s economic rebalancing remained intact as the first economic reports of 2016 signaled manufacturing weakened for a fifth straight month, the longest such streak since 2009, while a gauge of services rose to the highest level in more than a year. The official purchasing managers index edged up to 49.7 last month from a three-year low of 49.6 in November, the National Bureau of Statistics said Friday. The Caixin China Manufacturing PMI index released Monday showed a drop to 48.2 last month from 48.6. Both factory gauges were less than the median estimates in Bloomberg surveys. The official non- manufacturing PMI, rose to a 16-month high of 54.4. Numbers below 50 indicate deterioration. China’s stocks and currency fell on the signs of further weakness in manufacturing, a reflection of sliding exports thanks to sluggish growth abroad, and of overcapacity at home. (Bloomberg) Emerging stocks drop and developed market bonds rally as China halts share trading after plunge Emerging-market stocks tumbled the most in four months, with a rout in mainland shares triggering a trading halt, as weak Chinese manufacturing data and escalating tension in the Middle East sparked a selloff in riskier assets. Technology shares led all industry groups lower in the MSCI Emerging Markets Index. China halted trading in stocks, futures and options for the rest of the day after a 7% slump in the CSI 300 Index caused the nation’s new circuit breakers to kick in. The worst-ever start to a year for Chinese equities came after data showed manufacturing shrank for a fifth straight month and investors anticipated the end of a ban on share sales by major stakeholders. Government bonds across developed economies rallied after a plunge in Chinese shares drove demand for the relative safety of sovereign debt, pushing Treasury 10-year yields down by the most in more than two weeks. Benchmark German 10-year bonds opened higher, rising with European peers from Austria to France. (Bloomberg) UK economy finished 2015 strongly, says CBI Growth in Britain's private sector picked up speed in the three months to December and companies think the momentum will carry on into early 2016, a leading employers group said, suggesting a recent slowing of the economy might be easing. The Confederation of British Industry said on Monday its monthly growth indicator, based on surveys of manufacturers, retailers and services -- rose to a three-month high of +20 from +13 in November and was above a long-run average of +5. "The UK economy has finished the year strongly, with business services acting as a lightning rod for growth," said Carolyn Fairbairn, the CBI's director-general. A separate survey of chief financial officers of large British companies, conducted by accountants Deloitte, showed business confidence fell back to levels last seen in 2012. Growth in business services offset a slight fall in manufacturing in the three months to December, the CBI said. The slowdown in the global economy and the strength in sterling have hampered British exports, leaving the recovery reliant on consumers who have been helped by a combination of low inflation, near rock-bottom interest rates and rising wages. Britain's economy has outpaced many of its peers in the developed world over the past couple of years but growth slowed to 0.4% in the third quarter, according to unexpectedly weak official figures published in December. In 2015 as a whole, growth is likely to have slowed to around 2.2 percent, down from 2.9% in 2014. The Bank of England has said it expected the economy to grow by 0.6% in the fourth quarter of 2015. It is watching for signs of stronger wage growth before moving toward its first interest rate hike since before the financial crisis. The CBI survey found output expectations for the next three months rose to +20 in December from +17 in November. (Reuters)
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mashreq Fixed Income Trading
Daily Market Update Monday, January 4, 2015
Page 1
Market Update
Oman sets plan to halve oil's role in economy
Oman's government has released a five-year plan to halve the economy's dependence on the oil industry as low crude prices pressure government finances. The 2016-2020 plan, set out in a statement by the Supreme Council for Planning on Saturday, said over 500 programmes and policies would seek
to diversify the Omani economy into sectors such as manufacturing, mining, transport and tourism. The plan aims to cut the oil industry's contribution to
gross domestic product to 22% from 44%; the contribution of natural gas would drop to 2.4% from 3.6%. Average annual investments would total around
28% of gross domestic product; cumulative investment over the five years is expected to be 41 billion rials (USD106 billion), against 38 billion rials
envisaged in the previous five-year plan. The new plan is to make heavy use of public-private partnerships, with 52% of total investment to come from the
private sector against 42% in the last plan. The plan assumes an average oil price of USD 45 a barrel for 2016, USD 55 for 2017 and 2018, and USD 60 for
2019 and 2020, while Oman's average oil production is assumed to remain flat at 990,000 barrels per day. The figures assume that Oman will continue
running a state budget deficit throughout the plan. Last week, the government announced plans to cut its deficit to 3.3 billion rials this year from an actual
4.5 billion rials last year, partly through big spending cuts. (Reuters)
Saudi Arabia cuts ties with Iran after Tehran embassy attack
Saudi Arabia cut ties with Iran and expelled the Islamic Republic’s diplomats, a day after its embassy in Tehran was attacked to protest the Saudis’
execution of a prominent Shiite cleric. Iran’s ambassador in the kingdom has 48 hours to leave, Saudi Foreign Minister Adel al-Jubeir said late Sunday in
Riyadh. “Saudi Arabia will no longer deal with a country that supports terrorism and sectarianism,” he said. Iranian protesters set fire to the Saudi Embassy
in Tehran. The move marks the biggest crisis in relations between the regional powers since the late 1980s, when the Sunni-led kingdom suspended ties
with Shiite-ruled Iran after its embassy was attacked following the death of Iranian pilgrims during Hajj in Mecca. Al-Jubeir announced the expulsion after
Iranian protesters set the Saudi embassy on fire following the execution of Nimr al-Nimr, a critic of the kingdom’s treatment of its Shiite minority. He was
one of 47 men executed for offenses that included terrorism and political activism. Iran’s Supreme Leader Ayatollah Ali Khamenei warned of repercussions
and protesters armed with rocks and firebombs attacked the Saudi embassy in Tehran on Saturday and set parts of the building on fire. (Bloomberg)
Iran says its planned boost in oil exports won’t damage market
Iran is trying to regain its lost share of global crude sales and has no intention of harming the oil market with its planned increase in production once
sanctions are lifted from its economy, Oil Minister Bijan Namdar Zanganeh said. “The oil ministry intends to boost Iran’s crude oil exports by an aggregate
of 1 million barrels a day in two phases,” Zanganeh said, according to the official Islamic Republic News Agency. In the first phase, Iran will raise exports
by 500,000 barrels a day within a week after the removal of international sanctions, he said Sunday. The country will add another 500,000 barrels a day in
a second phase within six months after the curbs end, Zanganeh said. Brent crude slid 35% last year as the Organization of Petroleum Exporting Countries
raised output in the face of already rising global stockpiles. Saudi Arabia, the world’s largest crude exporter, has led OPEC in fighting for market share
against higher-cost producers such as shale drillers in the U.S. The group set aside its output target of 30 million barrels a day at a meeting in Vienna last month. (Bloomberg)
Biggest economies face USD 7 trillion debt refinancing in 2016
The amount of debt that the governments of the world’s leading economies will need to refinance in 2016 will be little changed from last year as nations
make strides in cutting budget deficits to a third of the highs seen during the financial crisis. The value of bills, notes and bonds coming due for the Group-
of-Seven nations plus Brazil, China, India and Russia will total USD 7.1 trillion, compared with USD 7 trillion in 2015 and down from USD 7.6 trillion in
2012. Japan, Germany, Italy and Canada will all see redemptions fall, while the U.S., China and the U.K. face increases. The amount of maturing debt has
gradually fallen since Bloomberg began collating the data in 2012. The decline may bring some support to the bond market as the U.S. Federal Reserve
gradually raises interest rates, pushing yields up from record lows. Budget deficits are forecast by economists to narrow for a seventh straight year in 2016
as governments continue to cut back on the extra spending put in place to combat the global financial meltdown. (Bloomberg)
China two-speed economy stays intact as manufacturing slumps
China’s economic rebalancing remained intact as the first economic reports of 2016 signaled manufacturing weakened for a fifth straight month, the longest
such streak since 2009, while a gauge of services rose to the highest level in more than a year. The official purchasing managers index edged up to 49.7
last month from a three-year low of 49.6 in November, the National Bureau of Statistics said Friday. The Caixin China Manufacturing PMI index released
Monday showed a drop to 48.2 last month from 48.6. Both factory gauges were less than the median estimates in Bloomberg surveys. The official non-
manufacturing PMI, rose to a 16-month high of 54.4. Numbers below 50 indicate deterioration. China’s stocks and currency fell on the signs of further
weakness in manufacturing, a reflection of sliding exports thanks to sluggish growth abroad, and of overcapacity at home. (Bloomberg)
Emerging stocks drop and developed market bonds rally as China halts share trading after plunge Emerging-market stocks tumbled the most in four months, with a rout in mainland shares triggering a trading halt, as weak Chinese manufacturing data
and escalating tension in the Middle East sparked a selloff in riskier assets. Technology shares led all industry groups lower in the MSCI Emerging Markets
Index. China halted trading in stocks, futures and options for the rest of the day after a 7% slump in the CSI 300 Index caused the nation’s new circuit
breakers to kick in. The worst-ever start to a year for Chinese equities came after data showed manufacturing shrank for a fifth straight month and investors anticipated the end of a ban on share sales by major stakeholders. Government bonds across developed economies rall ied after a plunge in
Chinese shares drove demand for the relative safety of sovereign debt, pushing Treasury 10-year yields down by the most in more than two weeks.
Benchmark German 10-year bonds opened higher, rising with European peers from Austria to France. (Bloomberg)
UK economy finished 2015 strongly, says CBI
Growth in Britain's private sector picked up speed in the three months to December and companies think the momentum will carry on into early 2016, a leading employers group said, suggesting a recent slowing of the economy might be easing. The Confederation of British Industry said on Monday its
monthly growth indicator, based on surveys of manufacturers, retailers and services -- rose to a three-month high of +20 from +13 in November and was
above a long-run average of +5. "The UK economy has finished the year strongly, with business services acting as a lightning rod for growth," said Carolyn
Fairbairn, the CBI's director-general. A separate survey of chief financial officers of large British companies, conducted by accountants Deloitte, showed
business confidence fell back to levels last seen in 2012. Growth in business services offset a slight fall in manufacturing in the three months to December,
the CBI said. The slowdown in the global economy and the strength in sterling have hampered British exports, leaving the recovery reliant on consumers
who have been helped by a combination of low inflation, near rock-bottom interest rates and rising wages. Britain's economy has outpaced many of its
peers in the developed world over the past couple of years but growth slowed to 0.4% in the third quarter, according to unexpectedly weak official figures
published in December. In 2015 as a whole, growth is likely to have slowed to around 2.2 percent, down from 2.9% in 2014. The Bank of England has said
it expected the economy to grow by 0.6% in the fourth quarter of 2015. It is watching for signs of stronger wage growth before moving toward its first interest rate hike since before the financial crisis. The CBI survey found output expectations for the next three months rose to +20 in December from +17
in November. (Reuters)
mashreq Fixed Income Trading
Daily Market Update Monday, January 4, 2015
Page 2
Japanese PM Shinzo Abe says Japan no longer in deflation, economy on recovery path
Prime Minister Shinzo Abe said on Monday that Japan was no longer in deflation, while pledging that the government and the central bank would work
together to completely defeat it. "We have put the utmost priority on the economy for these three years. We are still half way but we have created a situation that is no longer seen as deflation," Abe told a news conference. When later asked whether such statement may be taken as hasty judgment on
deflation, Abe said Japan has still not completely conquered deflation. (Economic times)
Tenaga said to plan USD3 billion global sukuk for expansion abroad
Malaysia’s biggest electricity company plans to tap the dollar debt market for the first time in two decades with its debut offering of global Islamic bonds.
Tenaga Nasional Bhd. is asking bankers to submit pitches for a USD3 billion sukuk program, according to people familiar with the matter, and proceeds will
be used to fund overseas investments including the purchase of a 30% stake in Turkish power firm Gama Enerji A.S. for USD243 million. The company last
issued dollar-denominated debt in 1996, when it sold 100-year conventional notes. (Bloomberg)
Fixed Income Trading
January 4, 2016 USD INVESTMENT GRADE ISSUES (LONG TERM)
Security Name ISIN Code MaturityOutstanding
Amount (Mio)
Coupon
TypeCoupon % Indic. Bid
Indic.
Offer
Offer
Yield %
Credit Rating
S&P/Moody/FitchCountry Payment Rank Min. Size
Risk
Rating
ABBVIE INC US00287YAL39 6-Nov-2022 3071 FIXED 2.90 97.04 97.36 3.34 A/Baa1/- UNITED STATES Sr Unsecured 2,000 P2
ABBVIE INC US00287YAQ26 14-May-2025 3750 FIXED 3.60 98.95 99.81 3.62 A/Baa1/- UNITED STATES Sr Unsecured 2,000 P2
ADOBE SYSTEMS INC US00724FAC59 1-Feb-2025 1000 FIXED 3.25 97.94 99.85 3.27 A-/Baa1/- UNITED STATES Sr Unsecured 2,000 P2
AIRBUS GROUP FINANCE BV USN2823BBD21 17-Apr-2023 1000 FIXED 2.70 96.16 97.25 3.13 A/A2/A- FRANCE Sr Unsecured 1,000 P2
ALCOA INC US013817AV33 15-Apr-2021 1250 FIXED 5.40 100.44 100.44 5.30 BBB-/Ba1/BB+ /*+ UNITED STATES Sr Unsecured 2,000 P2
AMAZON.COM INC US023135AJ58 29-Nov-2022 1250 FIXED 2.50 97.32 97.74 2.86 AA-/Baa1/- UNITED STATES Sr Unsecured 2,000 P2
AMERICAN EXPRESS CO US025816BD05 2-Dec-2022 1266 FIXED 2.65 96.97 97.55 3.05 BBB+/A3/A+ UNITED STATES Sr Unsecured 2,000 P2
AMERICAN INTL GROUP US026874DD67 10-Jul-2025 1250 FIXED 3.75 99.38 100.26 3.72 A-/Baa1/BBB+ UNITED STATES Sr Unsecured 2,000 P2
AT&T INC US00206RCM25 30-Jun-2022 2750 FIXED 3.00 97.65 98.11 3.33 BBB+/Baa1/A- UNITED STATES Sr Unsecured 2,000 P2
AT&T INC US00206RCN08 15-May-2025 5000 FIXED 3.40 96.09 97.05 3.78 BBB+/Baa1/A- UNITED STATES Sr Unsecured 2,000 P2
BANK OF AMERICA CORP US06051GEU94 11-Jan-2023 4250 FIXED 3.30 99.75 99.75 3.34 BBB+/Baa1/A UNITED STATES Sr Unsecured 2,000 P2
BANK OF AMERICA CORP US06051GFP90 21-Apr-2025 2500 FIXED 3.95 100.23 100.23 3.92 BBB/Baa3/A- UNITED STATES Subordinated 2,000 P3
BARCLAYS PLC US06738EAE59 16-Mar-2025 2000 FIXED 3.65 96.35 96.88 4.06 BBB/Baa3/A UNITED KINGDOM Sr Unsecured 200,000 P2