Saudi Arabia has closed the bid book for debut dollar-denominated bonds. According to preliminary data cited by the Financial Times (FT), the volume of bids exceeded $50 billion At the same time, the sources of Bloomberg claim that the demand amounted to about $67 billion, the final amount and the offering price will be announced later on October 19.
Saudi Arabia expects to place three tranches of dollar-denominated bonds with maturity of five, ten and thirty years. According to the expectations of Riyadh, Saudi yield bonds must exceed the yield on bonds with the same maturity. Writes the FT, the yield on five-year bonds should be above 160 b.p. ten-year — 185 b.p. thirty — 235 b.p. According to Bloomberg, which cites sources 140, 170 and 215 b.p. respectively.
Writes the FT, the accommodation takes place in terms of active investor interest in the purchase of bonds of developing countries, including Argentina, Mexico and Qatar. With high investor demand the yield on Saudi bonds may be reduced: now the ten-year bond yield is estimated at about 3.6%, or 50 b.p. higher rates in Qatar that meets the expectations of investors, the newspaper notes.
According to the FT, the size of the issue could reach $10-15 billion, making it the largest of the placements of countries in the Middle East and one of the largest among developing countries. The last record in the middle East established the Qatar, who in may held on the issue of the $9 billion Record among developing countries remains for Argentina, which in 2016 issued bonds for $16.5 billion.
Two sources Bloomberg did not rule out that the volume of placement in Saudi Arabia can beat the record of Argentina, reaching $17.5 billion.
Placement of state bonds takes place in the framework published in November 2015 of an ambitious plan to reduce the dependence of the economy of Saudi Arabia on oil prices. According to Bloomberg, amid a sharp reduction in budget revenues due to the fall in oil prices (for $115.1 per barrel in late June 2014 to $50,5 per barrel at the beginning of November 2015), the government was forced to reduce public expenditure, including various subsidies and salaries of civil servants. In 2015 the budget deficit in Saudi Arabia peaked in 1991, reaching $97 billion, or 15% of GDP.