GCC bond issuance surged to a new high of $40 billion in Q2 2019 led by Saudi Arabia despite lower yields, the National Bank of Kuwait (NBK) said in a recent report.
The numbers surpassed the previous high of $32 billion recorded in Q1 2019.
The Q2 issuances increased total outstanding debt (foreign and domestic) to $501 billion at the end of Q2 from $478 billion in Q1, the report said.
Issuance was dominated by sovereigns and quasi-sovereigns, with funding for strategic investments by sovereign wealth funds and state-owned enterprises a strong driver.
In addition, a large volume of maturing debt has likely helped ramp-up new issuance. Close to $43 billion in maturing debt is scheduled for 2019, of which $28 billion matured as of early-August.
Meanwhile, the bulk of issuance in Q2 came from Saudi Arabia, worth $26.8 billion. This included a jumbo $12 billion from Saudi Aramco in light of its plans to purchase a stake in SABIC.
Oman tapped international debt markets for the first time this year in July, with a successful $3 billion issue despite concerns over its fiscal position. A rise in issuance from the region’s financial firms was supported by a reported surge in mergers and acquisitions, especially in the UAE and Saudi Arabia.
With global and regional borrowing costs already low and perhaps set to decline further, issuance could remain strong for the remainder of the year.
Moreover, foreign investor appetite for regional paper remains solid, and GCC borrowing needs are supported by expansionary budgets and the recent drop in oil prices if sustained, NBK said.
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