Saudi Arabia’s sovereign wealth fund, known as the Public Investment Fund (PIF), announced the issuance of a $5 billion bond on a recent Monday, as reported by a credible capital markets publication. The PIF boasts an impressive $718 billion in assets under management as of the end of September.
This bond issuance is part of a broader trend this year, with several emerging market entities looking to debt markets for capital. The PIF’s bond offering, divided into three tranches, attracted considerable investor interest, amassing orders upward of $27 billion.
Investors’ enthusiasm led to tighter spreads than initially proposed. The final terms showed a reduction to 115 basis points (bps) over U.S. Treasuries for the 5-year bonds, trimmed from 150 bps. For the 10-year bonds, spreads settled at 145 bps over U.S. Treasuries, down from 175 bps. The 30-year bonds fell to 205 bps over the initial 235 bps.
Notable financial institutions including Citi, Goldman Sachs International, and J.P. Morgan took on roles as joint global coordinators for the bond offering.
The PIF represents a centerpiece in Crown Prince Mohammed bin Salman’s visionary strategy to diversify Saudi Arabia’s oil-dependent economy. It aims to pump billions into new industries and job creation efforts through both domestic and international investments, partnerships, and by accessing debt markets.
The kingdom, leading the world in oil exports, has recently concluded a $12 billion bond issue and a $3.5 billion Islamic bond issuance through the PIF last October, both of which witnessed strong demand.
The onset of 2024 has seen a flurry of bond sales from emerging markets, surpassing $30 billion in just the early weeks of January. The trend has favored sovereigns with solid credit ratings, including Mexico’s record $7.5 billion sale, as well as Poland, Hungary, and Indonesia taking active roles in the market.
Alongside Saudi Arabia, several other countries such as Indonesia, Poland, Turkey, Israel, and Mexico are expected to issue substantial bonds of at least $10 billion each, with Mexico’s potential reaching $18 billion.
Market analysts from Morgan Stanley predict that developing nations will collectively issue close to $165 billion in debt this year, marking a significant 20% increase from 2023, which equates to an additional $30 billion.
The exchange rate at the time of reporting was noted as $1 equivalent to 3.7505 riyals.