At 75 basis points (bp) over mid-swaps, the Eurobond carries a coupon of 4 per cent to yield 4.154 per cent. Maturity date is 24 January 2008.

'This is a massive success for Bahrain, as the paper is priced at the absolute low yield end of government bonds,' says a European banker. 'It is a positive sign, particularly in view of the geopolitical tension.'

The paper was evenly split between regional and non-regional investors. Within the Middle East, the bulk of the subscribers came from Bahrain, Dubai, Kuwait and Saudi Arabia, with Egyptian, Lebanese and Jordanian investors picking up smaller portions. Outside the region, 20 per cent of the bond was placed in the UK, 14 per cent in the rest of Europe and 13 per cent in Asia. US offshore investors bought the remaining 2 per cent.

Banks accounted for 65 per cent of all investors, followed by asset managers and funds at 25 per cent, with the remainder signed up by other institutions.

The 10 co-lead arranging banks were Ahli United Bank, Arab Bank, Credit Agricole Indosuez, DEPFA Bank, Gulf International Bank, HSBC, JP Morgan Chase & Company, National Bank of Dubai, National Commercial Bankand Standard Chartered Bank.

Although investment grade, the bond has a split rating assigned to it by international credit rating agencies. Standard & Poor'shas a long-term foreign currency rating for Bahrain of A-, while Moody's Investors Servicerates it Baa3. Fitch earlier this month raised the kingdom's long-term foreign currency rating to A- from BBB.