Bahrain Mirror: The absence of any signal of financial aid from Bahrain's neighbors sent the kingdom's credit risk rising the most in emerging markets this month, reported Bloomberg in a report published on Tuesday.

The Bahraini dinar, whose peg to the dollar has been effectively unchanged since 1980, fell a fourth day in the onshore market to the weakest level since at least 1988.

The report added that the cost of insuring Bahrain's debt against default for five years jumped 170 basis points on Monday, the most since records began in 2008, to 609. That's the highest among emerging-market peers after Lebanon.

Investors are seeking reassurance from Bahrain's Gulf allies that they will offer assistance to the cash-strapped nation. Its debt has also been battered as escalating trade tensions between the U.S. and China damped demand for riskier assets.

"The deterioration in macro fundamentals has been well-flagged for a while, but markets have just now started pricing this in," said Carla Slim, an economist for Standard Chartered Plc in Dubai. "Nervousness is increasing on the uncertainty of Bahrain's outlook given the lack of a medium-term debt sustainability plan and the absence of explicit support from Gulf Cooperation Council allies."

The yield on Bahrain's dollar-denominated bonds maturing in July 2022 rose to a record 9.26 percent Monday, before falling to 9.04 percent Tuesday. In comparison, Ghana's bonds due a year later yielded about 7.40 percent even though they are rated two levels lower by S&P Global Ratings than Bahrain's B+.

The Gulf nation's debt is rated junk by the three major companies.

The Bloomberg report further highlighted that "Bahraini officials have repeatedly said they don't plan on abandoning the peg to the dollar. But if the country were forced to shift its currency policy, it would raise doubts that other members of the Gulf Cooperation Council can sustain their pegs."

Arabic Version