Kuwait’s first sovereign bond sale attracts more than $20bn in investor bids
Business Published on: 16 March, 2017 @ 5:52 PM
Kuwait has extended the recent run of mega-debt issues in the Gulf with a debut sovereign bond sale that attracted more than $20bn of investor bids. The $3.5bn 5-year and $4.5bn 10-year bonds have been sold at a yield of around 2.8 per cent and 3.6 per cent respectively.
Kuwait timed its bond debut ahead of a US Federal Reserve meeting on Wednesday at which policymakers are expected to raise US interest rates – a move that could spark a rise in global bond yields, making it more expensive for governments to borrow.
The OPEC member sold $3.5 billion in five-year notes at 75 basis points over similar-maturity U.S. Treasuries and $4.5 billion in 10-year bonds at a 100 basis-point spread, according to a person familiar with the deal who spoke on condition of anonymity. The offer attracted about $29 billion in bids, the person said, allowing Kuwait to sell at a lower rate than Qatar, Abu Dhabi and Saudi Arabia offered last year, data compiled by Bloomberg show.
Last year, Saudi Arabia’s debut on international bond markets last October broke records when it drew $67bn of demand for a $17.5bn sale – the largest debt issue by an emerging economy.
The deal is the third-largest from the Gulf region, following Saudi Arabia’s record $17.5 billion and Qatar’s $9 billion sales last year. Gulf governments raised more than $48 billion in bond sales last year -- the most since at least 2007. Oman, the largest Arab oil producer that isn’t a member of OPEC, sold $5 billion from a three-part bond sale earlier this month that included five-, 10- and 30-year maturities.
Kuwait, OPEC’s fifth-largest producer, is rated AA at S&P Global Ratings, the third-highest investment grade. Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Deutsche Bank AG, NBK Capital and Standard Chartered Plc managed the sale.
Kuwait to witness growth
Kuwait’s benchmark stock index climbed 1.2 percent at close on Tuesday, the biggest one-day advance since Feb. 14. The bond sale “is seen as supportive” for the market, said Ali Adou, a money manager at The National Investor in Abu Dhabi.
Kuwait expects its budget deficit to narrow to 7.9 billion dinars ($25.9 billion) in the fiscal year that starts in April from 9.7 billion dinars in the previous 12 months, according to figures released in January. That includes money set aside for the country’s Future Generations Fund.
Al-Saleh, who is also the finance minister and chairman of the country’s sovereign wealth fund, said the bond sale “covers the bulk of our funding needs from the international market in 2017.”
By completing its sale on Monday, Kuwait avoided any possible increase in international borrowing costs if the U.S. Federal Reserve raises interest rates when it meets this week. Policy makers are expected to raise the benchmark interest rate by 25 basis points.
The issuance “has a very low spread but the diversification effect is good,” said Lutz Roehmeyer, the director of fund management at Landesbank Berlin Investment GmbH, who bid for the bond. The “huge issue size” adds to the bond’s appeal to investors by making it more liquid and easier to trade.
News Source: BloombergLike