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Sun 25 Aug 2019 10:37 AM

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GCC bond issuance surges to record $40bn in Q2 2019

Bulk of issuance in Q2 came from Saudi Arabia with $26.8bn

GCC bond issuance surges to record $40bn in Q2 2019

GCC bond issuance surged to a record $40 billion in the second quarter of 2019, in spite of lower yields, breaking the high of $32bn in the previous quarter, according to the latest report from the National Bank of Kuwait (NBK).

This lifted the total outstanding debt, foreign and domestic, to $501bn at the end of Q2, from $478bn in Q1.

The report said: “Issuance was dominated by sovereigns and quasi-sovereigns, with funding for strategic investments by sovereign wealth funds and state-owned enterprises a strong driver. In addition, a large volume of maturing debt has likely helped ramp-up new issuance.”

Some $43bn in maturing debt is scheduled for 2019, of which $28bn had matured as of early-August.

The bulk of issuance in Q2 came from Saudi Arabia with $26.8bn. This included a jumbo $12bn from Saudi Aramco as it looks to foster relationships with international investors ahead of its IPO scheduled for 2021 and in light of its plans to purchase a stake in SABIC.

Also of note, Oman tapped international debt markets for the first time this year in July, with a successful $3bn issue despite concerns over its fiscal position.

Meanwhile, a rise in issuance from the region’s financial firms was supported by a reported surge in mergers and acquisitions, especially in the UAE and Saudi Arabia.

The report said: “With global and regional borrowing costs already low and perhaps set to decline further, issuance could remain strong for the remainder of the year. Moreover, foreign investor appetite for regional paper remains solid, and GCC borrowing needs are supported by expansionary budgets and the recent drop in oil prices if sustained.”