Saudi Arabia’s $17.5bn bond sale has lessons for debt market

Saudi Arabia’s $17.5bn bond sale has lessons for debt market

Investors were largely impressed by the kingdom’s vision for change

YESTERDAY by: Elaine Moore in London and Simeon Kerr in Dubai

Saudi Arabia’s ambitious plan to chart a course away from oil dependence and towards a more diversified economy is off to a flying start — with a blockbuster $17.5bn debut sovereign bond sale.

Investors shrugged off concerns about the prospect of the sustained oil slump translating into years of anaemic growth, aggravating social concerns and a backdrop of regional tensions.

The lure of investing in a large economy with little debt that has never before issued a dollar-denominated bond, piqued global interest. Investor orders reached $67bn, enabling Saudi Arabia to borrow more — and more cheaply — than initially suggested.

As bankers pat themselves on the back and officials plan their next move, here is what we learnt from Saudi Arabia’s first sale of international debt.

Emerging market debt is still in fashion

This has been the year of the megabond, with the three largest sales of emerging market sovereign debt in history coming within the space of a few months. At $17.5bn, Saudi Arabia’s bond eclipses Argentina’s $16.5bn sale in April, making it a record issue for an emerging economy. It far outweighs neighbouring Qatar’s $9bn bond sold in May.

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