Qatar has issued the biggest-ever bond from the Middle East, selling a record $9 billion of Eurobonds and surprising an unsuspecting market, marking the emirate's first bond sale in four years.
The sale surpassed the expectations of most analysts, whose consensus was that the Gulf country would aim for a $5 billion target, almost half the amount of money it ended up issuing.
Qatar borrowed across three maturities, as it sold $3.5 billion in five-year notes at 120 basis point over US Treasuries, $3.5 billion in 10-year bonds at 150 basis point over Treasuries and $2 billion of 30-year paper at a 210 basis-point spread, reported Bloomberg . The issue received more than $23 billion in orders due to its desirable price.
Even though Qatar's is the biggest bond issue in the region so far, it has followed the suit of several other GCC countries in turning to the international bond market to take refuge from the decreasing oil revenues that have affected the region since the halving of oil prices in 2014.
In addition, Qatar is also in the process of financing the $200 billion infrastructure project required for its hosting of the 2022 FIFA World Cup. The country's budget deficit will widen to 5.2 percent of national output this year, according to the median forecast of eight analysts surveyed by Bloomberg.
“Nine billion is a helluva lot of bonds to put into the market and to some extent it is going to reprice the region,” said CEO of Dubai's Mashreq Capital (DIFC) Limited Abdul K Hussain, who oversees $1.5 billion.
“For guys like Saudi and Kuwait, and everybody else who has announced potential deals, it definitely means it’s very doubtful they would do anything for at least the next three or four months," Hussain added.
The Middle East's 2016 bond sales have now reached almost $30 billion, which is a record for the first half of a year. This follows Qatar's record deal and Abu Dhabi's $5 billion Eurobond deal in April, which included a tranche of five-year debt at a spread of 85 basis points.
Saudi Arabia is reportedly also in the process of following in the UAE and Qatar's footsteps. However, Moody's Investors Service rates Qatar and Abu Dhabi Aa2, which is the third highest investment grade, while Saudi Arabia's rating is much lower at A1.
This is leading analysts to expect the country to be pressured to offer higher pricing, especially after Qatar turned the tables with its record sale.