Saudi Arabia issued $12 billion in debt, its largest foreign borrowing since 2017, at a time when emerging countries are increasingly investing in bonds.
What happened: Borrowing from the desert kingdom contributes to the nearly $25 billion in bonds issued by developing countries since the start of the year, Bloomberg reported Monday. The largest of these was a $7.5 billion offer from Mexico.
These borrowings from Saudi Arabia represent more than half of the government’s projected budget deficit for this year. The move comes as many borrowers seek to benefit from lower financing costs following a significant decline in U.S. Treasury yields since October.
The oil-rich country sold six, ten and thirty-year bonds with yields of 4.89%, 5.13% and 5.91% respectively. The main banks responsible for the Saudi sale were Citigroup Inc. VS, JPMorgan Chase & Co. JPM, HSBC Holdings Plc HSBCAnd Standard Chartered Plc SCBFF.
However, according to Khatija Haque, chief economist at Emirates NBD Bank PJSC, the latest borrowing is expected to cover only about a quarter of Saudi Arabia’s total financing needs. Despite this, Haque stressed that the country’s debt stock remains “very low”, leaving “large room for maneuver for the government to raise capital”.
Meanwhile, in a move that sent shock waves through the oil market, Saudi Arabia has significantly reduced oil pricesleading to a significant increase in short positions in Brent crude and West Texas Intermediate crude.
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