Saudi Arabia has sold $6 billion of Islamic bonds, just as weaker oil prices push the kingdom’s budget into a deficit.
(Bloomberg) — Saudi Arabia has sold $6 billion of Islamic bonds, just as weaker oil prices push the kingdom’s budget into a deficit.
The country’s now issued $16 billion of dollar debt this year, more than any other emerging-market sovereign, according to data compiled by Bloomberg.
The new securities, known as sukuk, have maturities of six and 10 years, each $3 billion in size. The shorter tranche was priced at 80 basis points over US Treasuries, giving it a yield of about 4.3%. The longer notes were issued at 100 basis points over Treasuries.
Read: Saudi Arabia Returns to Debt Markets With Islamic Dollar Bonds
Saudi Arabia’s dollar bonds trade at an average yield of 4.7%, according to Bloomberg indexes.
The International Monetary Fund has said Saudi Arabia, which slipped into a fiscal deficit in the first quarter as spending increased, may post one for the full year too. The fund’s latest projections put the country’s breakeven oil price at almost $81 a barrel, above Brent’s current price of around $75.
Citigroup Inc., JPMorgan Chase & Co., and Standard Chartered Plc managed the bond sale.
“We expect the Saudi budget to be close to balanced this year,” said Khatija Haque, chief economist at Emirates NBD Bank PJSC. The new bonds will be “to refinance maturing debt and possibly raise capital for strategic infrastructure projects.”
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