Saudi Arabia Secures $12B In Largest Foreign Debt Borrowing Since 2017 – Citigroup (NYSE:C), HSBC Holdings (NYSE:HSBC)

Saudi Arabia Issues $12 Billion in Debt Amidst Increasing Bond Investments in Emerging Markets

Saudi Arabia has recently issued $12 billion in debt, marking its most substantial foreign borrowing since 2017. This move comes at a time when emerging-market nations are increasingly investing in bonds. According to Bloomberg, developing countries have already issued nearly $25 billion in bonds since the beginning of the year, with Mexico leading the way with a $7.5 billion offering.

Saudi Arabia’s borrowing contributes to more than half of the fiscal deficit projected by the government for this year. Many borrowers, including Saudi Arabia, are taking advantage of lower financing costs due to a significant drop in US Treasury yields since October.

The oil-rich nation sold six, ten, and thirty-year notes with respective yields of 4.89%, 5.13%, and 5.91%. The main banks handling the Saudi sale were Citigroup Inc. (C), JPMorgan Chase & Co. (JPM), HSBC Holdings Plc (HSBC), and Standard Chartered Plc (SCBFF).

However, the $12 billion borrowing is estimated to cover only about a quarter of Saudi Arabia’s total funding requirements, according to Khatija Haque, chief economist at Emirates NBD Bank PJSC. Despite this, Haque emphasized that the nation’s debt stock remains “very low,” leaving “plenty of scope for the government to raise capital.”

In a move that has sent shockwaves through the oil market, Saudi Arabia has drastically reduced oil prices, leading to a significant increase in short positions in both Brent crude and West Texas Intermediate crude.

Saudi Arabia’s decision to issue debt reflects the growing trend of emerging-market nations turning to bond investments to meet their funding needs. This borrowing not only helps bridge the fiscal deficit but also takes advantage of favorable financing conditions in the global market. As the year progresses, it will be interesting to see how other emerging-market economies navigate their borrowing strategies and take advantage of the investor demand for bonds.

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