Qatar central bank offers bonds in first riyal sale this year

Qatar’s central bank is offering QAR3bn ($825m) of government bonds in its first domestic bond sale this year, suggesting liquidity conditions are easing in a banking system pressured by low oil and gas prices.

A central bank official said results of the offer would be known on Tuesday. If it succeeds, it would be the bank’s first such issue since it sold 6.5 billion riyals of conventional bonds and sukuk last November, according to bank data.

The new offer comprises QAR1.5bn of three-year bonds at a fixed rate of 2.25 per cent, QAR1bn of five-year debt at 2.75 per cent, QAR250m of seven-year debt at 3.25 per cent and QAR250m of 10-year debt at 3.75 per cent, according to an offer document seen by Reuters.

Plunging state revenues due to low oil and gas prices have cut flows of new petrodollars into the banking system this year, pushing money rates up sharply and causing the central bank to cancel several monthly sales of short-term bills.

Since June, however, money rates have come off their highs, with the three-month interbank offered rate quoted at 1.54 per cent on Monday, down from June’s multi-year peak of 1.77 per cent though still up sharply from 1.13 percent 12 months ago.

The central bank has helped to improve liquidity in recent months by reducing the size of its Treasury bill issuance, a senior banking industry source said.

“Liquidity has gradually got better in the past six weeks, though it is still tight. The cost of deposits hasn’t come down,” a Qatari commercial banker said.

He added that it was not clear how much appetite banks would have for this week’s bond offer, which the central bank might be conducting as a way to gauge conditions in the banking system.

Qatar’s government raised $9bn in an international bond issue in late May, and there are signs that authorities may have provided at least some of this money to Qatari banks to ease liquidity pressures.

Government deposits at commercial banks in Qatar rose sharply to QAR68.0bn in June, their highest level in more than a year, from QAR57.0bn in May, according to the latest central bank data.

Deposits by local banks at the central bank jumped to QAR14.5bn in June, the highest since July 2015, from QAR3.7bn in May, suggesting banks now have more spare cash on hand.