The rise in debt issuance in the Gulf with a sudden occurrence

Following the slowdown in Gulf debt issuance over trading last August, the region is seeing a strong return to sovereign issuance, which are government-offered or corporate-offered debt. in seeks liquidity to finance their expansions.

However, the emissions fever observed in the region was mainly due to the decline in the cost of financing after the US Federal Reserve gave clear indications on the future of its monetary policy, which is still in easing phase, as the Fed believes that continuing its policy will push the economy towards it with a commitment to take what is needed, if necessary.

Market participants told Al that all of the problems the region has witnessed since late last month have reduced their target price, which means that borrowers have managed to obtain funds at a lower cost than most days last month, as the era It is widely expected that the Fed will begin to curtail its buying program.

The lower cost of financing prompted Abu Dhabi to return to global debt markets for the second time in 2021 to raise $ 3 billion after raising around $ 2 billion earlier this year, but this time at a lower cost, such as benchmark price for 30 one-year bonds were reduced from a level of 130 basis points above US interest rates to be priced at only 3%.

10-year bond prices were reduced to 65 basis points above the US interest rate from an indicative rate of around 90 basis points, while the 30-year bond was best in class among others. sovereigns, according to Bondevalue data seen by Al Arabiya. net.

rough price

A banking source in one of the banks that organized the deal told Al that the emirate’s long-term bonds were smaller than the size of those available, with those bonds offering a 3% yield, which is rarely the case in this category of bonds, bearing in mind that US bonds For the same duration, the yield is 1.95%, which makes it attractive for investment.

And from sovereign issues to corporate and bank issues, the most important of which was the National Bank of Kuwait, which raised about $ 1 billion from a rare issue of class bonds. senior. debt They are the primary debts that have a repayment in the capital structure if the bank goes bankrupt.

It is rare for the Bank of Kuwait to issue this type of bond, as the Bondevalue data examined by indicate that the bank has only $ 750 million in securities of the primary debt category.

A banking source who took part in the promotional tours the bank held two days before pricing the bonds said last week that the target price of the bonds was about 115 basis points above the U.S. interest rate. , but the unrivaled investor turnout caused the bank’s transaction price to drop by between 25 and 30 basis points in one moment in orders for which amounted to approximately $ 1.9 billion.

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