Saudi Arabia raises €1.5bn through bond sale

The issuance is the kingdom's second debt market deal in two months after it raised $5bn in January

Saudi Arabia's capital city, Riyadh. A new app launched by the country's Ministry of Justice aims to help protect workers from unfair labour practices. Shuttershock

Saudi Arabia raised €1.5 billion ($1.82bn) through the sale of euro-denominated bonds, its second deal in two months as the kingdom continues to diversify its funding base and take advantage of low interest rates.

The Arab world's biggest economy raised €1bn through three-year notes maturing in 2024, with a negative return of -0.06 per cent, and €500 million through nine-year notes, offering a return of less than 1 per cent, the kingdom's National Debt Management Centre (NDMC) said in a statement through the Saudi Press Agency on Thursday.

The issuance – the largest with a negative yield outside the European Union – was more than three times oversubscribed with total orders topping €5bn, minister of finance and acting minister of economy, Mohammed Al-Jadaan, said in a separate statement to the state news agency.

The level of demand proves the strength of the kingdom's ability to raise debt in different markets without affecting prices. It also indicates the “economic and financial powers of the kingdom and the possibility of consolidating and building strategic relationships with investors in different countries of the world”, Mr Al-Jadaan said.

The kingdom, which generates the bulk of its revenue through the sale of hydrocarbons, is diversifying its funding base in line with its Vision 2030 economic agenda and its Fiscal Balance and the Financial Sector Development programmes. The kingdom, like other Gulf sovereigns and corporate and government-related issuers, is taking advantage of ultra-low interest rates globally to shore up finances.

Saudi Arabia raised $5bn from a two-tranche, US dollar-denominated bond offering in January.

The latest issuance is only the second time the kingdom has issued euro-denominated bonds since July 2019, when it sold €3bn of 2027 and 2039 securities, after attracting over €14.5bn of orders, according to Bloomberg data.

Saudi Arabia's debt portfolio rose by 176bn Saudi riyals ($46.93bn), or about 26 per in 2020. Based on its budget statement, the kingdom expects government borrowing to rise to about 937bn riyals by the end of this year, or more than 32 per cent of GDP, according to NDMC's 2021 debt forecast.

Mr Al-Jadaan said the NMDC will continue to expand its investor base with a focus on developing and deepening the country's domestic debt markets. It will also seek "access to global debt markets as part of its risk management strategy and obtaining fair prices".
"The alternative government financing methods have recently been utilised as part of the ministry of finance's plan to support the continuity and completion of major development projects in the kingdom in order to achieve the goals of the kingdom's Vision 2030", Mr Al-Jadaan said.