Saudi Arabia set $17.5 billion bond sale

Saudi Arabia has raised more than $17 billion in its first foray into the global bond markets, according to news reports, as the kingdom struggles to close a budget deficit caused by declining oil prices.
The issue eclipsed the previous record for an emerging market sovereign bond sale, a $16.5 billion issue by Argentina in April, Reuters reported. The bonds are due to be repaid in 5, 10 and 30 years and are expected to trade at a 160-235 basis point premium to US Treasuries. The notes are expected to be rated A1 by Moody’s and AA- by Fitch.

The sale could finance about a third of next year’s budget deficit and stabilise foreign exchange reserves. "This should dampen any lingering concerns that the Riyal will be devalued," said Jason Tuvey, a Middle East economist at London-based Capital Economics.

Saudi Arabia registered a budget shortfall of $97 billion last year, equal to 15% of its gross domestic product, prompting the government this year to cut subsidies, wages and spending.

"Saudi's multi-part debt offering drew heavy investor demand as the world's top oil exporter sought to borrow at historic low yields," Reuters reported.