Saudi Arabia raised 3 billion euros ($3.4 billion) in a bond sale that highlights how tumbling borrowing costs are shifting the landscape in global capital markets.
The kingdom, which had only ever issued dollar-denominated bonds internationally, offered its first-ever euro bonds on Tuesday. The two-part issuance includes 1 billion euros of eight-year securities with a yield of 0.78% and 2 billion euros of 20-year notes yielding 2.04%, according to a person familiar with the matter, who isn’t authorized to speak publicly.
The rates are lower than on the government’s dollar securities. Saudi Arabia’s $5 billion of notes maturing in March 2028 yield 3.14%.
- Pricing guidance for the eight-year bonds narrowed to 80 basis points over midswaps from initial guidance of 115 basis points, said the person, who asked not to be identified. The final price equates to a spread of about 131 basis points above German bunds
- Pricing for the 20-year offering was set at 140 basis points over midswaps from about 170 basis points at start of the sale. That’s a spread of 201 basis points over bunds
- Final books for the bonds exceeded 14.5 billion euros
Relatively low euro rates come courtesy of the European Central Bank’s dovish tilt at a time when negative-yielding debt reached a record. Demand for returns among European investors has helped fuel sales by sovereigns across developing nations, boosting issuance so far this year to an all-time high of 31 billion euros, including the Saudi deal, according to Bloomberg League Tables.
“Most euro issuance has been flying off the shelf, so it’s an opportune time to come to the market,” said Anders Faergemann, a fund manager in London at PineBridge Investments.
Saudi Finance Minister Mohammed Al-Jadaan said in December the nation plans to raise about 120 billion riyals ($32 billion) of local- and foreign-currency debt this year to help fund the budget deficit. Tapping euros also opens up the market for Saudi exporters to raise euro funding.
Goldman Sachs Group Inc. and Societe Generale SA are global coordinators for the sale. BNP Paribas SA, Morgan Stanley and Samba Capital are joint lead managers.
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