Dubai: Saudi Arabia's record bond issues in 2012 are from a handful of the kingdom's biggest companies as a lack of a local-currency sovereign-yield curve hampers sales.
A 15 billion-riyal ($4 billion) sukuk by the state- controlled General Aviation Authority leads local-currency offerings from at least four borrowers in the world's top oil exporter, data compiled by Bloomberg show.
This compares with one sale in the year-earlier period and trails offerings in countries like Norway, an oil exporter with an economy 4 per cent smaller, where 96 borrowers raised about $12.8 billion.
While most Saudi companies rely on bank loans and equity markets for funding, greater access to bond markets in the region is essential to expand funding sources for private businesses and develop "more modern economies," Masoud Ahmad, Middle East and Central Asia director at the International Monetary Fund, said May 2.
Saudi Arabia, which is spending $500 billion on infrastructure, limits sovereign borrowing to weekly treasury-bill offerings even as Qatar expands such sales.
"The absence of a government bond market, specifically a yield curve, makes it that much more difficult to see a private bond market develop in any country," Mohieddine Kronfol, Dubai-based chief investment officer for global sukuk and Middle East and North Africa fixed income at Franklin Templeton Investments, said by phone on May 10.
"Typically they go hand in hand: Nowhere around the world do you have a functioning, active corporate bond market without a government bond market."
Saudi Arabia sold one-year Treasury bills on May 7 at a yield of 0.568 per cent, according to data compiled by Bloomberg. The next T-bill sale was scheduled for yesterday, the amounts sold are not disclosed.
By comparison, Qatar, the world's top liquefied-natural-gas exporter, raised 4 billion rials in Treasury bills last week, paying between 1.63 per cent on three-month securities and 2.85 per cent on nine-month notes.
Saudi Arabia is rated AA- at Standard & Poor's, the fourth- highest investment grade and one below level neighboring Qatar, which is listing Treasury bills on its local bourse to encourage local-currency offerings.