Oman returns to debt market as rally reduces borrowing costs

Oman, one of the weakest sovereigns in the Gulf Arab region, returned to the dollar debt market as a rally in its bonds that were issued about a month ago enabled it to lock in cheaper rates.

The cash-strapped sultanate raised $500m in a tap of its bonds due in 2027 and 2032. The securities were originally issued in October and yields have fallen more than 70 basis points since then, as advances in the push for a coronavirus vaccine boosted demand for riskier assets around the world.

Oman sold $200m in bonds maturing in 2027 at a 6.30 per cent yield, and $300m in bonds maturing in 2032 paying 6.90 per cent. The initial guidance was 6.45 per cent and 7.05 per cent respectively.

The sultanate has started to send the right signals to investors concerned about its dwindling reserves after lagging most of its neighbours in implementing fiscal reforms. It plans to start taxing the income of wealthy individuals in 2022 – breaking a regional taboo – and introduce a delayed value-added tax in April.

In the meantime, it’s in talks to win fiscal support from some regional neighbours, easing concerns about any risk of devaluation pressure on its currency peg.

The International Monetary Fund estimates Oman’s budget deficit could reach almost 19 per cent of gross domestic product this year. The government raised $2bn selling bonds in October.