Saudi Arabia and First Abu Dhabi tap bond markets

Reuters/Brendan McDermid

• Riyadh has sold $12bn of bonds
• UAE bank sets sukuk price
• Bond proceeds rebounded in 2023

Saudi Arabia sold $12 billion of bonds this week in a three-part issuance that was heavily oversubscribed, while First Abu Dhabi Bank set final pricing for its latest sukuk.

The Islamic and conventional bonds mark a strong start to 2024 for the Gulf’s fixed-income sector, which rebounded last year after a tough 2022.

Saudi Arabia sold bond tranches of $3.25 billion, $4 billion and $4.75 billion. These have durations of six, 10 and 30 years respectively and will help fund Riyadh government spending, reported IFR, a London Stock Exchange Group publication.

In total, the bonds attracted more than $30 billion in orders.

• Late-year flurry could boost sukuk market
• Islamic finance tops $3.3trn but growth challenges remain

Spreads on the six-year bonds fell to 90 basis points (bps) over US Treasury securities, from 115 bps in tentative pricing. The spreads on the 10 and 30-year bonds also tightened by 25 bps each, reaching 110 bps and 170 bps over US Treasuries respectively.  

Saudi Arabia’s national debt portfolio will increase to SAR1.115 trillion ($297.3 billion) by the end of 2024, the government’s National Debt Management Centre said last Thursday.

Separately, First Abu Dhabi, the UAE’s largest bank by assets, finalised the spread on a five-year sukuk this week, Reuters reported.

The benchmark-sized sukuk – which usually means at least $500 million – will pay a profit rate of 85 basis points over US Treasuries after the order book grew to about $1.45 billion, according to Reuters, which cited a document from an arranging bank in its report.

The sukuk is part of the bank's $5 billion sukuk programme.  

Sukuk are sharia-compliant bonds developed as an alternative to conventional bonds, which are not considered permissible by many Muslims as they pay interest and may finance businesses involved in activities not allowed under Islamic law.