Qatar plans QR4bn bond sale in June

Qatar plans its second sale of QR4bn ($10.2bn) of conventional and Islamic bonds on June 10 as the world’s richest country per capita builds a local debt market.

The central bank will issue QR3bn of bonds and QR1bn of sukuk, Central Bank Governor Sheikh Abdullah bin Saud al-Thani told Bloomberg in a phone interview from Doha.

Qatar sold QR1.5bn of three-year bonds and QR500mn of three-year sukuk March 10, the governor said. The country also issued QR1.5bn of five-year bonds and QR500mn of five-year sukuk on that date, he said. The March 10 sale was the first in what will be a quarterly offering of domestic debt.

Qatar is creating a debt market to provide a benchmark for pricing corporate bonds. The country began issuing treasury bills with three-month, six-month and nine-month maturities in May 2011.

The government and local companies are tapping debt markets to finance expansion as the nation embarks on more than $138bn of investments before hosting the soccer World Cup in 2022.

Eurozone confidence dives

Services have a “much more unfavourable” outlook; Economists say could mean a longer road out of recession; Moody’s says eurozone overrates ability to curb contagion

Reuters/Brussels

Confidence in the eurozone’s economy worsened in March, falling after four straight months of gains and suggesting a hard route out of recession, European Commission data showed yesterday.

Economic sentiment in the 17 countries using the euro decreased by a worse-than-expected 1.1 points to 90. Economists polled by Reuters had expected a decline to 90.4.

“The crisis atmosphere is back, uncertainty is back, and it also shows that the eurozone is still a long way out of the recession,” said Carsten Brzeski, an economist at ING. “With these numbers we’re heading toward another contraction in the first quarter,” he said.

Analysts said the survey may be the first to show some of the impact of the Cypriot crisis on business confidence across the eurozone, although the study makes no specific reference to the fallout from the chaotic bailout that began following a meeting of eurozone finance ministers on March 15-16.

Italy’s inconclusive election last month, which has failed to yield a government, also weighed on sentiment, economists said.

“There have been new uncertainties due to the situation in Italy, now Cyprus probably doesn’t help,” said JP Morgan Chase’s Greg Fuzesi, noting that the situation is preventing the data from improving quickly.

The decline in confidence put a halt to a sentiment recovery that had begun in November last year, undermined by a much more negative outlook from manufacturers, who had been helping Europe’s economy through exports.

The eurozone’s measure of the business cycle also reflected this, posting a fall in March of 0.14 points to -0.86.

Factories worsened their evaluation of their past performance and export order books, with the European Commission saying they had “declined markedly”.

Services also broke a trend of rising confidence since October, with managers of everything from health clinics to theatres lowering their expectations for consumer demand.

One bright spot in the Commission’s data was the relatively stable consumer confidence, which increased 0.1 points, due to higher expectations by consumers of their possibilities for employment.

Meanwhile, global ratings agency Moody’s said the eurozone’s awkward handling of Cyprus’s bailout puts extra pressure on the bloc’s downgrade-threatened sovereign ratings and shows policymakers overestimate their ability to contain the crisis.

Market analysts fear that could set a dangerous precedent for future rescue efforts and make the region more prone to bank runs if depositors in other debt-strained countries think their money is no longer safe.

“Policymakers appear very confident that market conditions are benign enough and that they have the tools to avoid contagion to other peripheral economies and their banking systems,” said Bart Oosterveld, managing director of sovereign risk at Moody’s.

“We think that that confidence may well be misplaced.”

While Spain and Italy have so far proven resilient, analysts fear the chaos in Cyprus has increased the risk of contagion if investors think the same will happen if other countries ever seek financial help.

The ECB has sought to quash suggestions the tactics used in Cyprus could become a bailout blueprint.

But comments on Monday from Jeroen Dijsselbloem, the head of the Eurogroup of finance ministers, that it could be a model for dealing with future euro zone banking crises has left market concerns difficult to erase.

Oosterveld, speaking alongside two of the firm’s other sovereign analysts, declined to comment on whether Italy and Spain, which both have negative outlooks on their respective Baa2 and Baa3 ratings, were particularly vulnerable to a downgrade after the events in Cyprus.

But they did say Cyprus remained at risk for a “prolonged period” of default and even of exiting the eurozone.

For Italy, the difficult eurozone backdrop and its own political troubles, were a headwind to its growth outlook and could have a future impact on its rating, said Dietmar Hornung, who oversees Italy for Moody’s.

The analysts were not so concerned about Spain, noting it had been easily selling bonds since the ECB said it would buy the debt of struggling countries, and that its fiscal situation was improving.

“While there was a lot of market talk about Spain being the first to apply to the OMT (ECB bond buying) programme, in the end, they didn’t need to and continued to enjoy market access,” Oosterveld said.

The picture in France was also unclear. Moody’s cut the rating of the euro zone’s number two economy by one notch last year and has said a further cut could come if its outlook continues to worsen.