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Saudi Arabia to raise $17.5bn in record-breaking bond auction

City A.M. Wednesday, 19 October 2016 ()
Saudi Arabia is on course to break records with its first ever government bond sale on the open markets.

The oil giant will raise $17.5bn as it seeks to accelerate its diversification away from oil in the largest dollar-denominated deal of its kind from an emerging market economy, according to reports on Wednesday.

Appetite for Saudi debt proved high, with investors trying to buy a total of $67bn, ensuring the government is able to borrow at cheaper than expected prices. The yield on the benchmark 10-year debt being offered is 3.44 per cent, slightly more expensive than neighbouring Qatar though comfortably within the sub-seven per cent pricing range which investors determine debt to be “investment-grade”.

The bond sale comes after the government posted a budget deficit equivalent to 15.9 per cent of its GDP in 2015 amid the oil price slump. This year the International Monetary Fund (IMF) expects the deficit to shrink to 13 per cent after oil hit a post-crisis low of $27 a barrel in January.

Two-thirds of the government’s revenue comes from the sale of oil, although this is down from around 90 per cent before the crisis. The price slump has also eaten into the country’s mammoth reserves, though they still stood at more than $600bn at the end of last year.
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News video: Saudi Arabia to Hold Bond Investor Meetings From Oct. 12

Saudi Arabia to Hold Bond Investor Meetings From Oct. 12 01:15

Oct. 10 -- Saudi Arabia is reported to begin fixed income investor meetings from October 12 for a potential bond sale. Bloomberg's Alix Steel reports on "Bloomberg Daybreak: Americas."

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