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Anticipation of the monthly auction of the Saudi sukuk, in half to an increase record of the yield on Treasury bills

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Fixed income investors await the sukuk auction tomorrow, which the Saudi issuer reserves the option to offer or not and, unlike the option to proceed with the offer, the issuer could use the auction to update the prices of some deadlines.

Major debt repayments were completed in early May and, before the end of the year, the Kingdom was placed in a better position to face the challenges of the expected rise in interest rates, with the possibility of taking advantage of any financing opportunities offered by the markets, “which is offset by a need for financing for development projects”, according to the Saudi newspaper “Al- Iqtisadiah “.

After raising nearly 43 billion riyals, according to funding needs for 2022, to pay off the principal debt, fixed income investors have begun to wonder if the door is still open for Saudi Arabia to launch an issue. international, especially in light of the high interest rates and the particularity of the domestic debt market and growing oil revenues.

On the other hand, Gulf debt issuance declined 69.5% year-on-year, reaching $ 11.6 billion at the end of the first quarter, compared to $ 38.1 billion in the same period last year. .

The first quarter issuance of debt instruments is considered the lowest in the last six years, in fact this low level of bond and sukuk issuance was not found until 2016, when the first quarter issuance was 6.4 billions of dollars.

The slow pace of the start of the quarter is due to a number of factors such as the pessimistic view of the high cost of financing for Gulf companies due to the increase record in US Treasury yields, the Ukrainian crisis, which temporarily closed the issuance windows, and the improvement in the finances of the Gulf governments due to the increase in oil prices. These data were based on the studio statistician conducted by the Department of Fixed Income Tools for First Abu Dhabi Bank. The data was also based on debt instruments in hard currency issued.

According to the Kingdom’s official calendar of local sukuk issues, Saudi Arabia will start holding an auction of sukuk denominated tomorrow. in riyal, in means increasing the yield on US Treasuries to one level record. Knowing that the sovereign issuer has the possibility to proceed or not with the monthly issues, after the completion of the payment of the principal shares in based on funding needs for 2022.

Ten-year US government bonds rose to their highest level in 11 years due to accelerating inflation and the possibility of more-than-expected monetary policy.

The 10-year Treasury bond yield rose 10 basis points to 3.49%. During prime two weeks in June, the levels are seen for the first time quest’year.

This increase in Treasury yields would increase the cost of financing for issuers that depend on the dollar or local currencies related to it.

These developments come between expectations of a tightening of monetary policy by the Federal Reserve and expectations of a rise in interest rates. in coinciding with the rise in the yield on US Treasuries.

Saudi Arabian bond market traders are driven by the movement of the different maturities of the treasury bills, when evaluating the prices of the sukuk segments offered during the monthly auction.

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