#SaudiArabia Kickstarts Multi-Tranche Dollar Bond Offering - Bloomberg

Saudi Arabia Kickstarts Multi-Tranche Dollar Bond Offering - Bloomberg

Saudi Arabia started the sale of a three-part dollar bond, its first Eurobond this year, as the kingdom seeks to take advantage of cooling inflation that’s raised hopes of an easier rate hike trajectory.

The world’s largest crude exporter has opened books for the issue with initial price guidance of about 140 basis points over U.S. Treasuries on a five-year tranche, around 170 basis points for a 10.5-year security and about 210 basis points for a 30-year bond, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it.

The Federal Reserve may lean toward smaller interest-rate increases after wage growth cooled in December, another step down in its aggressive campaign of monetary tightening. Even before the kingdom’s offering, Gulf financial institution First Abu Dhabi Bank PJSC was able to chop the pricing on a dollar bond sale Monday, as it joined a global issuance blitz spurred by lower funding costs and reduced volatility.

Even so, debt sales so far this year from Gulf issuers are down about 27% to $772 million from the year-earlier period as borrowing costs are still elevated. Average spreads on dollar company bonds have eased back to about 130 basis points from an October peak, according to a Bloomberg index, yet that’s still well up on the 90 basis points issuers were able to lock in just a year ago.

Saudi Arabia expects to run a surplus of 16 billion riyals ($4.3 billion) in 2023, nearly double a previous estimate of 9 billion riyals, it said last month. The Kingdom last sold $5 billion in bonds and Islamic securities in October.