Saudi Arabia Raises €3b in first bond denominated in European currency

Saudi Arabia has raised 3 billion euros from over 14.5 billion worth of orders for its first bond denominated in European currency, according to reports.

With this deal, the Saudis have sold over $60 billion in international bonds since their debut as a global borrower in late 2016, making the kingdom one of the biggest debt issuers among emerging markets, Reuters reports. “Saudi Arabia will benefit from strong tailwinds as there’s good demand for euro-denominated paper driven by European investors looking for alternatives to very low yields in government bonds in Europe,” Marcelo Assalin, head of emerging market debt at NN Investment Partners, a Netherlands-based asset manager, said while the deal was being marketed.

The eight-year tranche carries a coupon of 0.75%, the longer-dated bond 2%. After pricing, the eight-year tranche offered a 0.782% yield, the 20-year notes 2.042%, according to the document. Spreads on the eight-year bond tightened as the deal was marketed on Tuesday to end up offering 80 basis points (bps) over mid-swaps. The 20-year bonds offered 140 bps over the same benchmark, Reuters reports.

The bond is aimed at diversifying Saudi Arabia’s investor base, following predominantly dollar debt that has catapulted the kingdom up the ranks of emerging-market bond issuers, as the Wall Street Journal reports.

Saudi Arabia has turned to the international debt markets to help with spending deficits caused by low oil prices, becoming one of the biggest issuers of debt among emerging markets.