In a significant move, Saudi Arabia has sold a substantial $12 billion in debt, marking its most substantial borrowing abroad since 2017, contributing to a soaring start for emerging-market countries in the global bond market.
The kingdom’s latest bond sale adds to the nearly $25 billion of bonds issued by developing nations since the year’s commencement, the most notable among them being Mexico’s $7.5 billion offering. Saudi Arabia’s substantial bond issuance accounts for over half of the fiscal deficit projected by the government for the ongoing year.
Amid a notable drop in US Treasury yields since October, many borrowers are capitalizing on the opportunity to secure funding at lower costs. While the market anticipates a future reduction in interest rates by the Federal Reserve, this shift is not expected to materialize for several months.
The bond issuance from Saudi Arabia comprised six-, 10-, and 30-year notes, offering yields of 4.89%, 5.13%, and 5.91%, respectively. In comparison, 10-year US Treasuries are trading around 4%. The sale was primarily managed by major banking entities, including Citigroup Inc., JPMorgan Chase & Co., HSBC Holdings Plc, and Standard Chartered Plc.
Earlier projections by the world’s leading oil exporter envisioned fiscal surpluses until at least 2025. However, revised forecasts have become necessary due to crude prices persistently trading below the levels required to balance the country’s budget.
Market analysts present a more cautious outlook compared to the government’s projections. Khatija Haque, Chief Economist at Emirates NBD Bank PJSC, highlighted a forecasted budget deficit of approximately 4.3% of gross domestic product in 2024, with funding requirements exceeding $46 billion.
Commenting on the newly issued bond, Haque mentioned to Bloomberg Television that it likely represents only a portion of the total funding Saudi Arabia may need to seek across various capital markets. Yet, she highlighted that the country’s current debt load remains relatively low, offering significant potential for the government to raise additional capital.
Saudi Arabia’s move to tap into global bond markets aligns with the growing trend among emerging-market countries seeking financing opportunities amid changing economic landscapes, ensuring continued liquidity and financial stability.
