US and European credit markets are on edge, and investors are starting to hedge while it’s cheap. Banks and financial advisors like Barclays and Morgan Stanley are recommending clients turn to credit default swap (CDS) protection on the high-yield US index to hedge against possible defaults, Bloomberg reports. This comes as risks around prolonged geopolitical tensions, AI concerns, and a weakening US jobs market threaten markets.

Turning to derivatives: Prices were up 3 basis points this past week for protection on high-grade US corporate bonds as spreads on cashbonds tightened. Investors are being advised to sell less profitable protection to fund the swaps, and bullish positions in high-grade credit-default swap indexes fell by about a fifth in recent weeks, according to data from the business information service.

Why now? The risks from geopolitics and signs of cracks in the private credit market aren’t fully priced in, making this a good time to lock in protection, portfolio manager at Saba Capital Management Andrew Weinberg said.

ICYMI- Private credit is under the microscope. The asset class is currently struggling with slow inflows, mounting withdrawals, and warnings of defaults spiking as corporate, AI boom-linked debt rises. UBS forecast private credit default rates could reach 15%, though Ares Management’s CEO Mike Arougheti called that “absolutely wrong,” and Goldman Sachs’ CEO said the fears are overblown.

MARKETS THIS MORNING-

Asia-Pacific markets rebounded strongly in early trading this morning, coinciding with falling oil prices and easing concerns over the war in the region, especially after Trump said the war is nearing its end. Japan’s Nikkei surged over 3%, while South Korea’s Kospi jumped more than 6%. The sentiment is yet to hit Wall Street, with futures broadly in the red.

ADX

9,863

-0.4% (YTD: -1.3%)

DFM

5,754

-2.8% (YTD: -4.9%)

Nasdaq Dubai UAE20

4,736

-2.7% (YTD: -3.1%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

3.6% o/n

3.7% 1 yr

TASI

10,831

-1.6% (YTD: +3.2%)

EGX30

46,415

-0.8% (YTD: +10.9%)

S&P 500

6,796

+0.8% (YTD: -0.7%)

FTSE 100

10,250

-0.3% (YTD: +3.2%)

Euro Stoxx 50

5,685

-0.6% (YTD: -1.8%)

Brent crude

USD 88.84

-10.2%

Natural gas (Nymex)

USD 3.08

-1.2%

Gold

USD 5,152

+1.0%

BTC

USD 68,460

+3.1% (YTD: -21.9%)

Chimera JP Morgan UAE Bond UCITS ETF

AED 3.66

-1.9% (YTD: -0.2%)

S&P MENA Bond & Sukuk

1,030

+0.1% (YTD: +3.8%)

VIX (Volatility Index)

25.73

-13.3% (YTD: +84.6%)

THE CLOSING BELL-

The ADX fell 0.4% yesterday on turnover of AED 1.2 bn. The index is down 1.3% YTD.

In the green: E7 Group Warrants (+13.0%), Umm Al Qaiwain General Investment Co. (+10.7%), and Fujairah Building Industries (+10.3%).

In the red: Aldar Properties (-5.0%), Rak Properties (-5.0%), and Abu Dhabi Islamic Bank (-4.9%).

Over on the DFM, the index fell 2.8% on turnover of AED 711.4 mn. Meanwhile, Nasdaq Dubai was down 2.7%.

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