The bonds of OPEC’s largest crude producer have shrugged off historically low energy prices and the coronavirus pandemic this year. Investors are pondering how long that outperformance will last with Joe Biden in the White House.
Saudi Arabia’s U.S. dollar-denominated debt has handed investors an average return of about 10% this year through Nov. 13, the second-best performance among developing nations, according to data compiled by Bloomberg.
Despite its dependence on crude, the kingdom is one of the highest-rated sovereigns in emerging markets and its yields are more closely correlated to U.S. Treasuries than those of its developing-nation peers. Its $7 billion sale of Eurobonds in April was heavily oversubscribed, with investors placing around $54 billion of orders. The yield on Saudi Arabia’s 2060 dollar notes has dropped more than a percentage point since their offering seven months ago.
“There was a strong interest by Taiwanese insurers for A-rated longer-dated debt, and Saudi as well as Qatar have been net beneficiaries of this hunt for yield,” said Sergey Dergachev, a money manager at Union Investment Privatfonds GmbH in Frankfurt. Saudi-specific themes “have almost not been a driver at all for credit spreads of the country’s sovereign bonds this year,” he said.
“There was a strong interest by Taiwanese insurers for A-rated longer-dated debt, and Saudi as well as Qatar have been net beneficiaries of this hunt for yield,” said Sergey Dergachev, a money manager at Union Investment Privatfonds GmbH in Frankfurt. Saudi-specific themes “have almost not been a driver at all for credit spreads of the country’s sovereign bonds this year,” he said.
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