The Kingdom of Saudi Arabia raised $5bn via a dual-tranche bond deal launched during US hours on Tuesday. It raised:

  • $2.75bn via 12Y bonds at a yield of 2.336%, 130bp over Treasuries and 35bp inside initial guidance of T+165bp area
  • $2.25bn via 40Y bonds at a yield of 3.45%, 30bp inside initial guidance of 3.75% area

The new bonds are expected to be rated A1/A in line with the issuer rating. The 12Y and 40Y bonds received investor orders of over $13bn and $9bn, 4.7x and 4x issue size respectively. A fixed income strategist told Reuters, “The final pricing is in line with the sovereign curve and the high order book shows robust investor appetite for the region’s debt markets. This is sure to be the first of many deals by the kingdom this year.” Strong demand for the 40Y bonds due February 2061 led the final pricing to be 1bp tighter vs. its older 4.5% bonds due in April 2060 that are currently yielding 3.46% on the secondary market. As per Reuters, Saudi is expected to post a fiscal deficit of SAR 141bn ($37.59bn) or 4.9% of GDP in 2021 vs. an expected deficit of SAR 298bn ($79.45bn) or 12% of GDP in 2020. As per the bond prospectus, the deficit is expected to be funded largely by debt – local and international. Saudi raised a total of $12bn via international bonds in 2020 with the last issuance worth $7bn in April 2020.

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