Saudi Arabia prepares for debut international bond sale
Updated : 16:08
The details of the terms offered by Saudi Arabia on its debut sale of foreign currency sovereign debt got out as the Kingdom prepared to tap global capital markets to help fund a budget deficit which had swelled to 15% of gross domestic product in 2015.
The Kingdom offered to pay roughly 160 basis points over US Treasuries on five-year US-dollar denominated debt, 185 basis points more for ten-year instruments and 235 basis points more for 30-year debt, Bloomberg reported citing sources.
Riyadh was reportedly expected to issue at least $10bn-worth in bonds.
Five-year debt issued by Qatar - whose long-term debt rating was two notched above that of Saudi Arabia - was trading at a spread of 102 basis points over similarly-dated US Treasuries.
Saudi Arabia was rated A1 by Moody's, the fifth-highest possible grade.
The sale would come amid recent tighter liquidity among Saudi lenders and a rise in three-month interest rates.
It would also follow a $9bn sale of bonds by Qatar in May and a $16.5bn sale in April by Buenos Aires, with the latter having been the biggest ever bond sale by an emerging market sovereign.
Some market commentary attributed a brief rise in US 10-year notes earlier in the day to the Saudi announcement.
"We are very optimistic about these bond sales as the oil price is stabilizing. It is important to keep in mind that we keep the relation of oil and these bonds very visible. The have correlation but it requires strong move which means that the price of oil needs to move over 20% in either direction for these bonds to move.
"So the question is if these bonds are expensive on the market as the Middle East is new to the debt market and traders need to find a bench market. There is no meaningful benchmark as these countries used to use oil revenues to fill in their holes, but those days are long over. So what we can look at is the bond sales in Qatar. Qatar was the recent country which did its bond sales and the demand was massive," said Naeem Aslam, chief market analyst at Think Markets.