Saudi Arabia sold a $12.5bn international bond on Wednesday after drawing orders worth $40bn, as the Gulf’s biggest economy raises financing to cope with weak oil prices.
Saudi Arabia’s third sale in the international debt markets follows last year’s debut $17.5bn bond, the largest by an emerging market, and a $9bn sukuk, or Islamic bond, in April.
A modest oil price recovery in 2017 has improved the kingdom’s accounts, but Saudi Arabia’s foreign exchange reserves have fallen. They stood at $494bn in July, down from $744bn in September 2014, research firm CreditSights said.
Oil prices have risen from below $30 a barrel hit at the start of last year but remain roughly half their level mid-2014 level. Benchmark Brent is now trading around $58 a barrel.
Saudi Arabia has raised about $31.5bn through bond sales so far this year, against a 2017 budget deficit projected at about $53bn.
Wednesday’s issue was split into three tranches.
The first tranche, maturing in March 2023, was $3bn in size at 110 basis points (bps) over US Treasuries. The second, maturing in March 2028, was $5bn at 145 bps. The third, maturing in October 2047 was $4.5bn at 180 bps.
Fund managers said the pricing was considered attractive. “We expected initial price guidance to tighten by a quarter of a point and instead it tightened by 20 bps, definitely an attractive issuance,” said a Dubai-based investor.