Weekly Market Outlook

Saudi Arabia Said to Eye Bond Sale of as Much as $15 Billion

Saudi Arabia is considering the sale of as much as $15 billion of bonds this year, encouraged by investor demand for Qatar’s recent issue, people with knowledge of the matter said. The country may replicate Qatar’s $9 billion sale by issuing bonds with five-, 10- and 30- year maturities, the people said, asking not to be identified as the talks are private. It’s weighing a sale of $10 billion to $15 billion after the end of Ramadan in July, the people said, adding no final decision has been made and the discussions are still at a preliminary stage. It would be Saudi Arabia’s first bond sale in international capital markets. Governments in the six-nation Gulf Cooperation Council, which includes the two-biggest Arab economies of Saudi Arabia and the United Arab Emirates, are turning to public markets to raise funds after a plunge in oil prices led to higher budget deficits. Qatar last week attracted $23 billion in orders for its $9 billion sale, the biggest-ever bond issue from the Middle East. Abu Dhabi raised $5 billion from the sale of five and 10 year securities in April. Saudi Arabia’s Ministry of Finance didn’t immediately return calls seeking comment. Saudi Arabia has invited banks to arrange the bond sale, three people familiar with the plans said earlier this month. The country expects to issue a “significant” amount, the people said at the time, without giving more details. First Loan The debut bond will follow the country’s first loan in at least 15 years as it seeks to fill a budget hole estimated at about $100 billion this year. Saudi Arabia sealed a $10 billion facility in April, three people with knowledge of the matter said at the time. The country also hired HSBC Holdings Plc banker Fahad Al Saif to start a debt management office that will be responsible for the international bond sale, two separate people with knowledge of the matter said this week. Al Saif joined the Ministry of Finance on an open-ended secondment from HSBC’s Saudi British Bank, the people said. The country is undergoing its biggest-ever economic shakeup, led by Deputy Crown Prince Mohammed bin Salman, as it prepares for the post-oil era following the plunge in crude prices that started in 2014. One of the government’s biggest challenges will be navigating the worst economic slowdown since the global financial crisis as authorities cut spending to plug a budget deficit that reached about 15 percent of gross domestic product in 2015. Dubai is also preparing an international bond sale this year, according to three people with knowledge of the matter.