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Thu 18 Feb 2016 02:01 PM

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Yields jump at Oman bond auction as state finances pressured

New central bank figures show extent of pressure on banking system liquidity due to low oil prices

Yields jump at Oman bond auction as state finances pressured

Yields jumped at an auction of domestic Oman government bonds this week, according to central bank figures released on Thursday, showing pressure on banking system liquidity due to low oil prices.

The government sold 100 million rials ($260 million) of five-year development bonds at an average yield of 4.32 percent. The central bank said the issue had attracted an "overwhelming response" from subscribers, but did not give details.

The last issue of five-year development bonds, a 300 million rial sale last August, saw an average accepted yield of 2.54 percent.

Low oil prices have reduced flows of new petrodollars into banks and slashed state revenues, prompting the government to step up its borrowing.

To reduce upward pressure on domestic interest rates, the executive president of the central bank said this month that Oman planned to borrow between $5 billion and $10 billion from abroad. He also said the government would issue 600 million rials of domestic bonds this year.

On Wednesday, Standard & Poor's lowered its long-term credit rating of Oman by two notches to BBB-, one level above junk status, from BBB+, predicting a state budget deficit of about 13 percent of gross domestic product this year.

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