Dubai: In what could be termed as the biggest bond issue in the Middle East, Qatar sold $9 billion in Eurobonds, its first in a gap of four years, to bridge the widening deficit.
The size of the offer was almost double than the original to benefit from lower pricing ahead of a rate rise by the US Federal Reserve and exploit the available liquidity without having to pay a materially higher premium.
“The fact that deal got successfully done indicates healthy oversubscription and demand for GCC credits. Global investors appetite for GCC risks is being boosted by positive sentiment on oil prices,” Anita Yadav, head of fixed income research, Emirates NBD told Gulf News.
The country borrowed across three maturities, selling $3.5 billion in five-year notes at 120 basis points over US Treasuries, the same amount in 10-year bonds at 150 basis points over Treasuries and $2 billion of 30-year paper at a 210 basis-point spread, reports said.
“The pricing was generous, supporting the demand for the paper. The size of the issue surprised the market, with around $5 billion expected,” Monica Malik, Chief Economist at Abu Dhabi Commercial Bank told Gulf News.
For Abu Dhabi issue, which took place last month, the 5-year notes came in lower than Qatar at 85 basis points over US Treasuries.
Qatar is the latest among countries in the Gulf Co-operation Council after Abu Dhabi raised $5 billion in a similar issue last month, to tap the international bond market to plug deficit caused by falling prices of crude oil, from which these countries earn most of its revenues. ADCB expects Qatar’s deficit to be at 4.4 per cent of the GDP in 2016.
Front loading
“Qatar could be front-loading it borrowing requirement, with either expectations of higher interest rates and strong issuances from other GCC entities,” Malik said.
Qatar issue would be closely watched by Saudi Arabia, which also plans to tap the international bond market, in terms of pricing and the amount of interest it generates.
“There is likely to be a better response for the Saudi issue,” Muhammad Faisal Potrik, head of research with Riyad Capital said over email, with some analysts saying the pricing would be higher as the ratings of Saudi Arabia is rated lower than Qatar.
Moody’s Investors Service cut its rating on Saudi Arabia to A1 from Aa3, five notches above junk, while Qatar rating was kept unchanged, although outlook was revised to negative.