When we previewed the historic, first ever, international Saudi bond offering in three, 5Y, 10Y and 30Y parts, whose totla size was expected to range between $10 and $15 billion, we said "we anticipate there to be substantial demand and the issue to be massively oversubscribed potentially leading to an upsizing of the issue to $20 billion." We were mostly right.
According to latest reports the Kingdom, which yesterday unexpectedly announced it had executed a member of its royal family for murder, is now set to sell $17.5 billion in the biggest bond sale ever from an emerging-market nation, a number which may still rise thanks to what is a massive oversubscription: as of this moment the orderbook is said to be "around $67" billion, or roughly 4 times oversubscribed, courtesy of the global financial repression imposed by central banks, forcing investors into the smallest trace of yield.
Some more details, according to Bloomberg:
- IPTs 5Y +160a, 10Y +185a, 30Y +235a
- Govt aims to sell USD bonds due in 5Y for ~140bps over similar maturity USTs, 10Y at spread of ~170bps, 30Y at 215bps, give or take 5bps
- The 10Y bonds will yield around 3.44%, well below the 3.6 per cent initially suggested, the 5Y will yield 2.63% and the 30Y around 4.64%.
- Sale expected to eclipse Argentina’s $16.5b offering in April as largest from a developing nation, underlining the deepening strain on a country that has eschewed international debt markets until now
Putting the sale in context, Saudi Arabia clocked up a budget shortfall of $97b last year, equal to 15% of its GDP, prompting the government this year to cut subsidies, wages and spending. Much of the proceeds will be used to stabilize the social order in the kingdom, however we anticipate that billions will also be routed to fund the ongoing war with Yemen, which will ultimately benefit US military contractors, in effect recycling the money from global bond investors into the US Military and Industrial Complex.