Saudi Arabia Raises $11.5 Billion Through First Dollar Bonds This Year

SadaNews - Saudi Arabia has raised $11.5 billion through the issuance of dollar-denominated bonds, as part of its efforts to leverage global markets to finance massive projects aimed at reducing its economic reliance on oil.

The offering, comprised of four tranches launched on Monday and maturing in periods ranging from three years to 30 years, saw demand peak at over $29 billion, according to a person directly familiar with the matter. The individual added that demand later fell to just under $28 billion.

The strong demand allows the Kingdom to offer a lower premium over U.S. Treasury bonds compared to initial expectations. The longest tranche in the deal, a $3.5 billion bond maturing in 2056, is set to pay a premium of 1.1 percentage points above Treasury yields, the individual noted, which is about 30 basis points lower than the initial pricing levels discussed at the beginning of the offering.

Earlier this month, the Ministry of Finance approved borrowing plans pointing to issuances ranging between $14 and $17 billion in international bond markets this year. At the upper limit, this would be below 2025 levels, while the lower end would represent the smallest issuance size since 2022.

Expectations for Saudi Arabia to Sell Bonds Worth $25 Billion

Nevertheless, Saudi Arabia may exceed its funding targets. Goldman Sachs has forecast that Saudi Arabia will issue standard international bonds worth $25 billion this year and that its fiscal deficit will reach 6% of GDP, higher than the government's target of 3.3%.

The Saudi Ministry of Finance had secured a $13 billion loan late last year, with the proceeds earmarked for infrastructure projects and a seven-year term. The loan was heavily marketed to Chinese banks, according to informed sources.

This loan deal is the latest in a series of transactions that have pushed Saudi Arabia to tap the Asian market for liquidity in a bid to diversify its funding sources.

Asian banks are keen to lend amid a shortage of domestic transactions. The volume of loans in Asia, excluding Japan, in dollars, euros, and yen has fallen to its lowest point in five years by 2025, according to data compiled by Bloomberg.

High Demand for Longer-Dated Bonds

The offering on Monday also included bonds maturing in five and ten years. According to the individual, the strongest demand was focused on the longer maturities, with the thirty-year bonds attracting peak demand exceeding $8.1 billion.

The ten-year bonds attracted orders surpassing $7.9 billion, five-year bonds garnered over $6.5 billion, while demand for three-year bonds exceeded $5.2 billion.