DIB sells first sukuk in emirate since virus outbreak

A DIB branch in Dubai, where lockdown measures are being lifted. (Reuters)
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Updated 11 June 2020

DIB sells first sukuk in emirate since virus outbreak

  • The DIB sukuk was over- subscribed by 4.5 times

RIYADH: Dubai Islamic Bank (DIB), the UAE’s largest Islamic lender, sold a $1 billion sukuk, the first in the emirate since the coronavirus disease (COVID-19) pandemic broke out across the world, forcing much of region into lockdown.

The five-year Islamic bond has a profit rate of 2.95 percent and attracted strong investor interest, the bank said in a stock exchange filing.

The deal was priced after completing a global investor call, which was attended by several local, regional and international investors. The sukuk was oversubscribed by nearly 4.5 times, and attracted more than 170 investors.

DIB said almost half of the order book originated from outside the Middle East and North Africa region.

“Despite the challenging global environment due to the COVID-19 pandemic, we are grateful for the positive response from the global investor community,” said CEO Adnan Chilwan.

The debt sale comes as several corporations and governments in the Gulf seek to bolster their finances to face the economic fallout from the COVID-19 pandemic and a historic slide in oil prices.

The sale comes just weeks after the emirate of Sharjah, the third-largest in the UAE, sold $1 billion in seven-year sukuk, or Islamic bonds.

The pandemic has increased funding pressures on governments and companies alike across the region.

Earlier this year S&P Global Ratings warned that the knock on effects of lower economic growth and oil prices could slow lending growth and increase the overall stock of problem assets across the Gulf economies.

‘Lower for longer’: Fed’s warning on interest rates

Updated 24 September 2020

‘Lower for longer’: Fed’s warning on interest rates

  • The Fed cut rates to near zero in March and took other steps to combat a recession

WASHINGTON: Federal Reserve Vice Chair Richard Clarida said on Wednesday that policymakers “are not even going to begin thinking” about raising interest rates until inflation hits 2 percent, comments aimed at cementing the public’s understanding of the US central bank’s new approach to monetary policy.

“Rates will be at the current level, which is basically zero, until actual observed PCE inflation has reached 2 percent,” Clarida told Bloomberg Television, referring to the Fed’s preferred measure of prices. PCE inflation tends to be somewhat lower than the better-known consumer price index.

“We could actually keep rates at this level beyond that. But we are not even going to begin thinking about lifting off, we expect, until we actually get observed inflation equal to 2 percent. Also we want our labor market indicators to be consistent with maximum employment.”

The Fed cut rates to near zero in March and took other steps to combat a recession that took hold as businesses shut down and consumers stayed home to fight the spread of the coronavirus.

Clarida said that with further government aid from Congress and the steps the Fed has already taken, the US economy could return from the current “deep hole” of joblessness and weak demand in perhaps three years.

To aid that process, the Fed in late August revised its approach to monetary policy to commit to lower rates for longer periods of time, allowing the risk of higher inflation to try to encourage a stronger economic recovery and more job gains for workers. A follow-up policy statement last week gave more specific guidance about future decisions, but questions remain about what the new approach will mean in practice.

Clarida said there should not be any confusion: Rates will not increase until labor markets recover and prices hit the Fed’s target.

“So lower for longer, and we have given some observable metrics,” for judging when a rate hike debate might begin, he said.

Decisions about any possible overshoot of inflation are “academic” at this point, he added, and can be made once the economy rebounds.