Riyadh returns to domestic bond market

22 June 2016

The government plans to sell $5.3bn local currency bond to banks next week

Saudi Arabia’s plans to sell about SR20bn ($5.3bn) in local currency bonds to banks and financial institutions next on 27 June.

The domestic debt sale this month will comprise five-, seven- and 10-year bonds in fixed- and floating-rate tranches. Riyadh is offering fixed-rate notes at 60-65 basis points (bps) above US Treasuries for the five-year tranche, 72-77 bps over for notes of seven-year life span and 85-90 bps over for the 10-year tranche, news agency Reuters quoted the Saudi Arabia’s Maaal website as saying.

The government would be offering the floating-rate bonds at 25 to 30 bps below the three-month Saudi interbank offered rate for five years, 10 to 15 bps below for seven years and flat to 5 bps above for 10 years, according to the website.

Saudi government since August 2015 has been selling about SR20bn of local currency bonds to banks every month in a bid to plug the budget deficit on the back of lower oil prices. Oil which accounted for more than 70 per cent of the government revenues in 2015 has slumped form the mid-2014 peak of more than $110 per barrel to the current $50 per barrel level.

Riyadh in the past few months has also tapped the international debt market to shore up cash reserves. It raised a $10bn international loan last month and is speaking with banks to help it sell a US-dollar bond in coming weeks or months.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications