Saudi Arabia inspires confidence with blockbuster bond

Saudi arabiaInvestors showed faith in the Saudi Arabian economy by buying $17.5 billion of the country’s sovereign bonds – more than expected.

The high demand allowed Saudi Arabia to price the bonds at a lower yield than had been forecast. The thirty-year Saudi bonds were sold at a 4.5% yield, the ten-year bonds at 3.25% and the five-year bonds at 2.375%.

It was the largest emerging-market bond sale to date, exceeding the $16.5 billion raised by Argentina in April.

The money raised will finance a third of Saudi Arabia’s budget deficit next year and almost all its current account shortfall, according to economic research firm Capital Economics.

“This should dampen any lingering concerns that the riyal will be devalued,” said Capital Economics.

However, some say that, rather than reflecting confidence in Saudi Arabia, the bond sale indicates a paucity of alternative investment options in an environment where many developed markets are selling sovereign bonds at negative interest rates.

©2016 funds global mena

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