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(Bloomberg) — Saudi Arabia sold $12 billion worth of bonds, its biggest deal since 2017, in a record start to the year for emerging markets.
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The kingdom added to the nearly $25 billion in bonds sold through emerging countries since the beginning of the year, the largest of which $7. 5 billion is being offered from Mexico. The Saudi deal amounts to more than a portion of the government’s budget deficit. is forecasting for this year.
Many borrowers are seeking to lock in lower funding costs following a steep drop in US Treasury yields since October. While the Federal Reserve is widely expected to start cutting interest rates this year, pushing down yields even more, that probably won’t happen for several months.
The six-, ten- and thirty-year government bonds with yields of 4. 89%, 5. 13% and 5. 91% respectively. Ten-year U. S. Treasuries are trading at around 4%.
Investors placed around $30 billion of orders, according to Saudi Arabia’s debt office. Citigroup Inc., JPMorgan Chase & Co., HSBC Holdings Plc and Standard Chartered Plc were the main banks managing the sale.
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Until a few months ago, the world’s largest oil exporter expected to post budget surpluses until at least 2025. But it has since revised its forecast and crude costs are trading well below expectations. You want to balance your budget. It also plans to increase spending on projects pushed by Crown Prince Mohammed bin Salman to diversify the economy.
This month, the government estimated its overall financial wishes at around 86 billion riyals ($23 billion) for this year.
Many analysts have a more bearish outlook. Khatija Haque, chief economist at Emirates NBD Bank PJSC, said the Dubai lender is forecasting a budget deficit of about 4.3% of gross domestic product in 2024 and more than $46 billion of funding requirements.
Read: Bond sales hit an all-time high as emerging markets face a year of risk
The new bond “is probably about a quarter of what they’re going to have to factor in total” across all capital markets, Haque told Bloomberg Television. Still, the country’s debt inventory is “very low” and the government has “a lot of opportunities. “to raise capital. “
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