Iraqi Bonds Slide for Eighth Day as U.S. Strikes Militants

Iraqi bonds fell, sending yields higher for an eighth day, as U.S. airstrikes against extremist Sunni militants in the country stoked concern the security situation may continue to deteriorate.

The yield on the debt maturing in January 2028 climbed eight basis points to 7.49 percent at 2:37 p.m. in London, bringing this week’s increase to 30 basis points, the most since the period ended June 20. Stocks and currencies in emerging markets fell as tension in OPEC’s second-largest producer and Ukraine spurred a flight to safer assets including oil and gold.

Iraqi bonds have fallen on “the deterioration of internal security,” Richard Segal, an international credit strategist at Jefferies International Ltd. in London, said by e-mail. Investors have to consider “that it is not possible for the governing authorities to retain control of Iraq,” he said.

Two U.S. fighter jets struck an artillery position used by the militants to attack Kurdish forces defending their regional capital Erbil, where U.S. diplomats and some military personnel are based, Rear Admiral John Kirby, a Pentagon spokesman, said in a statement. Fighters from the Islamic State, an al-Qaeda offshoot, have seized oil fields and taken control of the country’s largest dam since capturing the northern city of Mosul on June 10.

The yield on the $2.7 billion of 2028 bonds has jumped 99 basis points since then as the insurgents threaten Prime Minister Nouri Al-Maliki’s government. The ISX General Index of equities in Baghdad tumbled 2.7 percent to the lowest level on record yesterday, taking the drop this week to 4.6 percent.

Brent futures advanced 0.2 percent in London and West Texas Intermediate by 0.5 percent in New York. Iraq, home to the world’s fifth-largest oil reserves, has been rebuilding its energy industry after decades of war and economic sanctions.

The militants, previously known as Islamic State in Iraq and the Levant, attacked villages in the north, driving as many as 50,000 people into hiding as the group declared a self-styled caliphate and pushed into Syria.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE