Sale to commercial banks will be the first time since it returned to the debt market last month to fill a budget gap caused by falling global oil prices.
Saudi Arabia could raise up to 20 billion riyals ($5.33 billion) from bonds on Monday, opening its sale to commercial banks for the first time since it returned to the debt market last month to fill a budget gap caused by falling global oil prices.
Debt-averse Saudi Arabia, the world's top oil exporter, sold bonds last month for the first time since 2007 and plans more sales to help fill a budget deficit which the International Monetary Fund estimates at $150 billion this year.
Last month's 15 billion riyals worth of notes were sold only to quasi-government funds, but commercial banks will now be included. The banks were briefed two weeks ago by the central bank, the Saudi Arabian Monetary Agency (SAMA), on its plans.
While no firm figure has been disclosed for Monday's sale, several Saudi-based sources at banks or government bodies told Reuters the total value was expected to be between 15 billion and 20 billion riyals, in tranches issued for five, seven and ten years.
SAMA could not be reached for comment. The sources spoke on condition of anonymity as the information was not public.
The five-year tranche is expected to be priced to yield between 33 and 38 basis points more than the equivalent US Treasuries, while the ten-year tranche would yield between 45 and 50 bps over US Treasuries, two of the sources said.
One of the sources, at a government entity, also said the seven-year portion would yield between 38 and 44 bps more than US Treasuries.
Further debt issuance is planned by the Saudi government on a monthly basis to the end of the year, although estimates vary as to the total amount of debt the authorities will sell.
According to one of the Saudi sources, at a commercial bank, lenders were told at their late-July meeting with SAMA that a maximum of 40 percent of the budget deficit would be covered by debt, with the balance met by drawing down on its huge reserves.
Saudi Arabia's net foreign assets declined $59.8 billion in the first six months of 2015, although the kingdom still had $664.5 billion, meaning a near-term budgetary squeeze is unlikely.
Future debt issuance could also see different maturities offered: the government source and a second source said the option of issuing a bond with a three-year maturity in October has been discussed, although nothing has been approved.
Something doesn't sound right here. If I had $664.5 billion in the bank, I would not be selling bonds to raise $5.33 billion. Does anyone ask questions like this over there?