Qatar taps domestic market with $1.26bn bonds

18 August 2016

 The central bank of gas-rich Gulf state sold both conventional and Islamic bonds

Qatar’s central bank has sold QR4.6bn ($1.26bn) of conventional and Islamic government bonds in its first domestic government bond offer this year.

It sold a total of QR3bn of conventional bonds, which includes QR1.5bn three-year debt instrument offering a fixed rate of 2.25 per cent, a QR1bn five-year debt at 2.75 per cent, QR250m of seven-year paper at 3.25 per cent and QR250m 10-year debt at 3.75 per cent. The central bank also sold QR1.6bn of Shariah-compliant paper in the local market.

“The demand was fine and most banks participated,” news agency Reuters cited an unnamed central bank official as saying , who added that bids by banks for conventional bonds had exceeded the amount offered by QR50, and for sukuk by QR2.4bn which is sign the liquidity in the system is alright.

The central bank may sell another bond next month, the official said without elaborating.

The central bank cancelled several monthly sales of short term debt absence of fresh petrodollar inflow sent the money rates up sharply and liquidity came under pressure. Since June, however, rates have come off and there is relative improvement in liquidity along with a rise in government deposits at commercial banks, according to the report.

Like many other GCC peers, Qatar has tapped the international and domestic markets to shore up capital as slumping hydrocarbons prices have dented its financial muscle. Qatar, which is the world’s largest exporter of liquefied natural gas (LNG) is facing a budget deficit this year after a fiscal surplus of many years.

It raised $9bn in a three-tranche bond offering in May, a record for the Gulf sovereign. Bahrain has already selected banks to help it sell a benchmark-sized eurobond later this year. In June, Oman raised $2.5bn through the sale of dual-tranche bonds while Saudi Arabia is looking to raise as much as $15bn from a bond offering later this year. In April, Riyadh also agreed terms with a group of international lenders for a $10bn loan, its first sovereign debt for at least 15 years.

Abu Dhabi, the biggest emirate in the UAE, launched a two-part $5bn bond, while Kuwait has indicated interest in tapping capital markets to raise funds.

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