As Persian Gulf states build cash buffers to deal with any potential economic fallout from the Iran war, one large buyer has stepped in: Pacific Investment Management Co.
Since the conflict began on Feb. 28, Pimco has lent more than $10 billion to state-backed and government borrowers in the Gulf via so-called private placements, according to people familiar with the matter.
The $2.27 trillion asset manager has been a significant buyer of privately placed bonds issued by the governments of Abu Dhabi, Qatar and Kuwait, as well as by Qatar National Bank, said the people, who asked not to be identified discussing confidential information. Pimco also participated alongside other investors in several placements that boosted the size of existing Abu Dhabi bonds by a combined $2.5 billion, they added.
In total, regional borrowers raised $13.8 billion from Feb. 28 to April 23, in privately placed bonds denominated in hard currency, according to data compiled by Bloomberg — meaning Pimco accounted for a majority of that lending.
Spokespeople for Pimco and Abu Dhabi’s Department of Finance declined to comment, as did the Kuwait Investment Authority, which handles the country’s debt transactions. Representatives for Qatar’s ministry of finance and QNB didn’t immediately respond to requests for comment.
Private placements are a trade-off for issuers. They can be more expensive than public debt, meaning they offer higher returns for buyers such as Pimco. In return sellers are able to borrow faster, with more privacy and greater flexibility on deal terms.
The coupon on Qatar’s privately placed bond was 4.8%. That was about 0.3 percentage points higher than implied by the yield curve for the country’s public traded bonds, according to Bloomberg calculations. The actual yield for bondholders depends on the price at which they bought it from the issuer, which wasn’t disclosed.
“Not all countries have the option of borrowing at reasonable interest rates at a time of geopolitical uncertainty. It’s notable that the three Gulf nations with the strongest balance sheets are the ones tapping the market,” said Ziad Daoud, chief emerging markets economist at Bloomberg Economics. “And they’re resorting to private borrowing instead of public issuance. The latter probably requires more disclosure and higher transparency.”
The Newport Beach, California-based Pimco has invested heavily in emerging market bonds. It opened an office in Dubai last year, joining a rush of investment companies seeking to deepen their presence in a region flush with sovereign wealth. Pimco said this move built on over 20 years of managing assets for investors in the Middle East.
Pimco intends to hold the bonds over the long term, one of the people said. Earlier this month, Pimco bought all of a $400 million bond issued by a Blue Owl Capital Inc. fund, in an important vote of confidence for the private credit specialist.
Gulf bond markets were among the busiest globally in recent years, with regional borrowers selling about $50 billion of public debt in the first two months of this year. But those markets have effectively shut since the conflict began.
Before a ceasefire between the US and Iran was agreed in early April, Gulf Arab states contended with thousands of missiles and drones over several weeks, intercepting the vast majority. The effective closure of the Strait of Hormuz disrupted energy exports — a key source of government revenue — prompting the International Monetary Fund to cut growth forecasts across the region.
US Treasury Secretary Scott Bessent said Wednesday that many Persian Gulf allies had requested foreign exchange swap lines with the US, a day after President Donald Trump said an arrangement with the UAE is under consideration.
The UAE has informally inquired about a currency swap, if the economic and financial impact of the war worsens, people familiar with the matter had told Bloomberg News. The Emirati ambassador to Washington signaled the country had no need for external financing, and Bloomberg Economics’ Daoud described the inquiry as “a call for confidence, not a call for help.”
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