Saudi Arabia leads Gulf debt spree with $15 billion new offer

Lower oil price, leading to higher bond sale from Gulf countries this year And Saudi Arabia is the de-facto leader. Mohammad bin-Salman, new strongman of Saudi Arabia, and deputy crown prince has chalked up plans to free up the country a lot from oil dependence and that pretty fast. That means higher investment, which is not easy at a time, when oil revenue is low and fiscal deficit at 16% of GDP. So the kingdom has chosen to tap the international bond market this year.

The kingdom issued $10 billion in April and now plans to raise another $15 billion with distributed maturities and up to 30 yrs. Last week, Qatar surprised markets with $9 billion issuance, largest ever. Six members of Gulf Cooperation Council (GCC) raised $12.5 billion in May, largest ever. Oman is also planning to raise up to $2 billion.

Despite lower oil price, which has hit these states hard, lower debt to GDP ratio and rarity of these instruments in the market, bids have been quite high. Qatar’s $9 billion sale attracted $20 billion worth of orders.

Seeing investors’ appetite for these instruments, which provide 200-300 basis points higher than treasuries, expect more oil hit economies to join in, especially from the Gulf.