Saudi Arabia sold more than $20 billion of international bonds since the start of the year, a record for a January as companies and banks join government fund raising.
Banks are increasingly turning to debt markets in response to tightening liquidity conditions, as slowing deposit growth and tougher capital rules make it harder to meet strong credit demand driven by the kingdom’s Vision 2030 agenda. Higher capital requirements due to come into effect this year will force banks to keep more funds on their balance sheets.
Companies are also taking advantage of attractive pricing and rising demand from Asian investors to reinforce their finances.
“Favorable market conditions in terms on rates and spreads, still strong demand and rising Asian investor interest” are among reasons for rising Saudi borrowings, Basel Al-Waqayan, fixed-income strategist at Bloomberg Intelligence, said.
The Saudi government raised $11.5 billion in early January through a dollar bond sale that attracted demand of $28 billion. Saudi Electricity and Saudi Telecom followed with $2.4 billion and $2 billion Sukuk bonds. Saudi National Bank, Riyad Bank and Al Rajhi Bank raised at least $1 billion each.
The kingdom signaled it would slow sovereign international bond sales this year, after years of voracious borrowing appetite which placed it among the heaviest issuers in emerging markets and the largest in the Gulf Cooperation Council.
The finance ministry plans to borrow $14 billion to $17 billion from international markets this year.
Yet Saudi Arabia has a history of overshooting its funding targets. Goldman Sachs Group Inc. predicts the Saudis will issue a record $25 billion of international debt this year.
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