Expect more Gulf sovereign bond issues this year – agency

Gulf governments are expected to issue $32.5 billion of international bonds this year, almost matching the record level seen in 2016.

According to ratings agency Moody’s, which made the prediction, money raised by the bonds will meet more than a fifth of Gulf governments’ financing needs.

“Although Saudi Arabia, Kuwait and Oman will partly draw down on the government’s sizeable sovereign assets, Moody’s anticipates that favourable market conditions and the limited depth of many of the region’s domestic financial systems mean that all GCC issuers, with the exception of Abu Dhabi, will head to the international market again in 2017,” said the agency in a statement.

Record international issuances from Saudi Arabia and Qatar, among others, made 2016 a bumper year for Gulf sovereign bonds. The $38.9 billion raised in international issues during the year has generally been used to meet budget shortfalls, allowing governments to keep up their spending commitments despite the continued low oil price.

Bond investors have responded favourably to the Gulf sovereign issues so far. Saudi Arabia was able to borrow more than expected, and at better rates, when it went to market in October, due to its issue being heavily oversubscribed.

“Moody’s views the fact that most GCC sovereigns were able to access the international bond market in fiscally challenging times as a credit-positive,” said the agency. “However, the financing of continued fiscal deficits will lead to weaker net asset positions or rising net debt.”

©2017 funds global mena

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