Supply pipeline a factor in $11 bln bond sale, says Al-Saif

Saudi Arabia has said that the “supply pipeline” was a factor in its decision to bring its latest bond deal to market, through which the Kingdom raised on Tuesday $11 billion while drawing $52 billion of orders, the Financial Times reported.

“The decision to embark on the deal (on Tuesday) was specifically related to the market conditions and supply pipeline … we do not take geopolitics into consideration,” Fahad Al-Saif, president of Saudi Arabia’s debt management office, told the newspaper.

Al-Saif said Saudi Arabia was looking to bring a deal to market in recent weeks, but was holding off due to a bout of volatility.

“We had been ready to go since earlier in the year but we wanted to complete the loan financing first and not do both fundings at the same time,” he said. “Our international funding is concluded for the year.”

Saudi Arabia sold seven-year notes worth $4.5 billion at 140 basis points (bps) over US Treasuries; 12-year notes worth $3 billion at 175 bps over US Treasuries; and 31-year notes worth $3.5 billion at 210 bps over the similar benchmark.

The maturities fill gaps in the country’s yield curve, Al-Saif said.

Saudi Arabia aims to generate around 35 percent of its finance internationally, and will now focus for the rest of the year on issuing in its domestic market, the newspaper said.

The Kingdom is interested in issuing another sukuk but that would be a strategic move to fuel its domestic Islamic finance market rather than because of a need for funding, Al-Saif said.

 “I don’t think we will be approaching the market anytime soon, and when we do it will not be a significant size,” he added.