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Mon 15 Aug 2016 02:35 PM

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Qatar offers $825m gov't bonds in first sale of 2016

Qatar central bank sale suggests liquidity conditions are easing in a banking system pressured by low oil and gas prices

Qatar offers $825m gov't bonds in first sale of 2016

Qatar's central bank is offering 3 billion riyals ($825 million) of government bonds in its first domestic bond sale this year, suggesting liquidity conditions are easing in a banking system pressured by low oil and gas prices.

A central bank official said results of the offer would be known on Tuesday. If it succeeds, it would be the bank's first such issue since it sold 6.5 billion riyals of conventional bonds and sukuk last November, according to bank data.

The new offer comprises 1.5 billion riyals of three-year bonds at a fixed rate of 2.25 percent, 1 billion riyals of five-year debt at 2.75 percent, 250 million riyals of seven-year debt at 3.25 percent and 250 million riyals of 10-year debt at 3.75 percent, according to an offer document seen by Reuters.

Plunging state revenues due to low oil and gas prices have cut flows of new petrodollars into the banking system this year, pushing money rates up sharply and causing the central bank to cancel several monthly sales of short-term bills.

Since June, however, money rates have come off their highs, with the three-month interbank offered rate quoted at 1.54 percent on Monday, down from June's multi-year peak of 1.77 percent though still up sharply from 1.13 percent 12 months ago.

The central bank has helped to improve liquidity in recent months by reducing the size of its Treasury bill issuance, a senior banking industry source said.

"Liquidity has gradually got better in the past six weeks, though it is still tight. The cost of deposits hasn't come down," a Qatari commercial banker said.

He added that it was not clear how much appetite banks would have for this week's bond offer, which the central bank might be conducting as a way to gauge conditions in the banking system.

Qatar's government raised $9 billion in an international bond issue in late May, and there are signs that authorities may have provided at least some of this money to Qatari banks to ease liquidity pressures.

Government deposits at commercial banks in Qatar rose sharply to 68.0 billion riyals in June, their highest level in more than a year, from 57.0 billion riyals in May, according to the latest central bank data.

Deposits by local banks at the central bank jumped to 14.5 billion riyals in June, the highest since July 2015, from 3.7 billion riyals in May, suggesting banks now have more spare cash on hand.

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