Stock Bahrain Manama skyline
Bahrain will look to use the debt raised to bring down its widening deficit issue. Image Credit: Shutterstock

Manama: Bahrain has started marketing a three-tranche dollar bond to help plug one of the widest deficits in the region.

The kingdom is selling 'benchmark-size' seven-year debt, 12-year securities and/or notes maturing in 30 years. Benchmark typically means the equivalent of at least $500 million.

Despite a $10 billion bailout package pledged by its wealthier neighbors in 2018, Bahrain's public finances have been under strain from the twin shock of the pandemic and lower oil prices. The International Monetary Fund projects Bahrain's budget deficit to be at about 9.2 per cent of gross domestic product this year.

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Investor appetite is there

"They are coming because they need to continue to fund fiscal deficits," said Abdul Kadir Hussain, the Dubai-based head of fixed-income asset management at Arqaam Capital. "There is appetite for non-investment grade credit as people are chasing yield."

The smallest economy among the six Gulf Cooperation Council members is taking advantage of relatively low borrowing costs, after Oman sold $3.25 billion of debt last week. Bahrain's bonds returned 6.5 per cent in the fourth quarter, the most among regional peers after Oman, according to Bloomberg Barclays indexes. Both countries are rated junk by the three major credit assessors because of their precarious public finances and strained reserves.