Global Arab Network - Qatar’s sovereign bonds were the best performers in the Middle East in August as investors sought refuge from a slowing U.S. economy and a worsening debt crisis in Europe.

Four of the five best-performing securities among the 32 that make up the HSBC/NASDAQ Dubai Middle East Conventional Sovereign Bond Index were from Qatar. The fifth was from Abu Dhabi. The total return on Qatar’s 6.4 percent bond due 2040 was 7.25 percent last month, according to data compiled by Bloomberg. The JPMorgan Emerging Markets Bond Index returned 0.22 percent. U.S. government bonds had a return of 2.8 percent in August, the most since December 2008, according to a Bank of America Corp. index.

“There has been a global flight to quality since July as macroeconomic conditions deteriorated in the U.S. and Europe,” Gus Chehayeb, a Dubai-based associate director at investment bank Exotix Ltd., said in an e-mailed response to questions yesterday. “Bond investors shifted funds into regional sovereigns with the cleanest and strongest balance sheets, and for Middle East-focused investors this meant a capital flight into Qatar and Abu Dhabi.”

Employment in the U.S. unexpectedly stagnated in August, raising the odds the world’s biggest economy will slip into recession. Political squabbling over the U.S. budget deficit that led to the country being stripped of its AAA credit rating and mounting concern about a default in Europe has caused the S&P 500 share index to drop 8 percent between July and August.

Qatar Gas

Qatar, the world’s biggest exporter of liquefied natural gas, forecasts its economy will expand 15.7 percent this year. The country projects a budget surplus of 22.3 billion riyals ($6.1 billion) this fiscal year, and the International Monetary Fund says Qatar will have the world’s fastest-growing economy for the second straight year in 2011.

The default risk of Qatar and Abu Dhabi, both rated AA by S&P, climbed less than eight basis points to 102 and 102.1 respectively, since the U.S. lost its AAA rating for the first time in history, according to data provider CMA. Credit default swaps for Japan, also rated AA at S&P, the third-highest investment grade score, rose 12 basis points to 105.44, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Read More: Click Here http://www.businessweek.com/news/2011-09-04/qatar-bonds-best-performers-in-august-on-quality-arab-credit.html