File - Stock exchange information screens are seen on the trading floor at the Dubai Financial Market in this April 29, 2012.REUTERS/Jumana El Heloueh
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Bond investors' confidence in Dubai is surviving two tests at once, with bond prices staying strong even as the stock market tumbles and concern mounts over volatility in the real estate sector.This time, the bond market is delivering a vote of confidence in Dubai.The spread between the Dubai government's $750 million, January 2023 sukuk, which is unrated, and Abu Dhabi's dollar bond maturing in April 2019, which at Aa2 is one of the Gulf's top-rated credits, actually narrowed this week, by 6 basis points to 207 bps.Five-year Dubai credit default swaps, which during the emirate's financial crisis hit levels above 600 bps, edged up just 2 bps from Monday's multiyear low to 147 bps.Perceptions of Dubai risk relative to other emerging markets have shifted over the past three years.The main risk to Dubai appears to be U.S. interest rates, which when they start to rise could quickly transmit themselves to Dubai's economy through the currency peg.
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