RIYADH: Saudi Arabia conducted the largest-ever emerging market bond sale on Wednesday, selling $17.5bn of debt in the government’s first international offer while attracting investor orders totaling almost four times that amount. The huge demand, larger than many market participants had expected, was partly due to ultra-low global interest rates and funds’ frustration with a lack of high-yielding assets around the world. But the sale was also a success for the world’s top oil exporter in its efforts to convince investors that it can cope with an era of low crude prices and ultimately reduce its dependence on oil.
London-based Capital Economics estimated the U.S. dollar issue would finance around a third of next year’s state budget deficit and almost all of the kingdom’s current account gap, meaning its foreign exchange reserves were unlikely to fall much further in coming years. “This should dampen any lingering concerns that the riyal will be devalued. The government’s debt-to-gross domestic product ratio will rise as a result of the bond sale but, given its low starting point, it is hardly on a worrying path,” Capital Economics said.
The issue eclipsed the previous record for an emerging market sovereign bond sale, a $16.5 billion issue by Argentina in April. A source familiar with the offer said order books totaled $67 billion, coming close to the $69 billion record set by Argentina. In the days before the sale, senior Saudi officials held a series of meetings with top investors in London and the United States to describe ambitious economic reform plans that include sharp cuts in state spending and a drive to develop non-oil businesses.
