Saudi Arabia taps debt markets with $12bn three-part bond

Saudi Arabia raised $12bn from global debt markets in a three-part bond sale, attracting strong investor demand, the National Debt Management Center (NDMC) said on Tuesday. The proceeds are expected to help plug the kingdom’s budget deficit, repay maturing debt, and fund its vast economic diversification projects.

The NDMC said that Saudi Arabia sold $5bn, $3bn and $4bn in tenors of three, six and 10 years, respectively, and the total order book reached around $37bn.

The pricing on the shortest tranche of the $5bn issuance was tightened by 35 basis points (bps) from the initial guidance, settling at 85 bps over US Treasuries, resulting in a yield of 5.18 per cent. The $3bn notes were issued with a spread of 100 bps, yielding 5.44 per cent. Meanwhile, the $4bn bond offered a yield of 5.73 per cent.

“The bid-to-cover ratio reflects the strong demand for the kingdom’s issuances, confirming the investors’ confidence in the strength of the kingdom’s economy and its future investment opportunities,” the NDMC said in a statement.

On Sunday, the NDMC estimated Saudi Arabia’s funding needs in 2024 at $37bn (SAR139bn). Over SAR100bn will cover the budget deficit, while the rest will repay maturing debt.

Saudi sovereign wealth fund, the Public Investment Fund (PIF), which is driving many of the Vision 2030 projects, secured a $7bn Murabaha credit facility, a form of Islamic financing, on Monday.

The Arab world’s largest economy expects a fiscal deficit of $27bn in 2025. To address this, the government plans to explore a diverse range of funding options, including private investments and accessing new international markets and currencies.

Saudi Arabia is likely to issue loans. Last week, the kingdom secured a $2.5bn three-year revolving credit facility from Abu Dhabi Islamic Bank, Credit Agricole and Dubai Islamic Bank.

Read: Saudi’s PIF secures $7bn murabaha credit facility