Middle East news

Published: May 15, 2020

GCC sovereigns face very selective audience

The Gulf Cooperation Council states were rocked by the collapse in oil prices in April. Sovereign issuers from the region, however, still managed to print US$24bn of debt that month, but other names could struggle going forward.

Qatar brought the biggest GCC bond issuance in April when it sold US$10bn across three tranches ranging from five to 30 years. Abu Dhabi sold US$7bn of debt in the same week.

The deals came a few weeks before oil oversupply fears tore through global markets and sent the West Texas Intermediate futures into negative pricing for the first time ever. Brent crude, which has a more international basis which means physical storage of a barrel of oil is easier than the landlocked WTI, fell below US$20 a barrel at the same time. 

“These are unprecedented times in global energy markets” said Chris Turner, global head of markets and regional head of research for the UK and CEE, at ING. “The dependency of GCC markets on oil revenue naturally has a big say in both national budgets and the current account balance.”

The real test for investor appetite for GCC debt came on April 15, as oil prices were falling sharply because of the effect on demand from the coronavirus pandemic. Saudi Arabia, the world’s biggest oil exporter, printed a US$7bn trade split into a US$2.5bn 5.5-year bond, a US$1.5bn 10-year bond and a US$3bn 40-year bond.

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