The sovereign wealth fund of Saudi Arabia, known as the Public Investment Fund (PIF), initiated a bond offering to the tune of $5 billion earlier this week, as detailed by a report from IFR, a specialist in capital markets news.
Boasting a portfolio management of approximately $718 billion as of the end of September, the PIF is part of a broader surge in emerging market entities seeking funds through the debt market within the current year.
The bond issuance by PIF was met with overwhelming interest, accumulating bids surpassing $27 billion. The robust demand resulted in a tightening of the final spreads compared to the initial guidance. For the 5-year bonds, the spread settled at 115 basis points above US Treasuries, shrinking from the starting 150 basis points. Similarly, the 10-year bonds ended at 145 basis points over the benchmark, down from 175 basis points, while the 30-year bonds concluded at 205 basis points, a dip from the initial 235 basis points.
Citi, Goldman Sachs International, and J.P. Morgan took the lead as the joint global coordinators overseeing the bond sale process, as indicated by official documents.
PIF Fuels Saudi’s Shift Away from Oil Reliance
Championed by Crown Prince Mohammed bin Salman, the PIF is at the forefront of Saudi Arabia’s strategic vision to diminish its dependency on oil revenue and to broaden its economic landscape. The fund has been instrumental in accruing tens of billions to propel the creation of new sectors and employment opportunities. This has been achieved through domestic expansion, international ventures, and leveraging the debt market for investments.
This month, Saudi Arabia, recognized as the leading oil exporter globally, successfully completed a $12 billion bond issuance. In addition, last October, the PIF finalized a $3.5 billion sale of Islamic bonds, both of which witnessed substantial market demand.
The start of 2024 has seen a vigorous launch of debt issuances among emerging markets, with bond sales in the initial half of January exceeding $30 billion. The trend has favored sovereigns with solid credit ratings, as evidenced by Mexico’s record $7.5 billion sale, along with active participation from Poland, Hungary, and Indonesia.
Projections suggest that at least five nations, including Saudi Arabia, are each poised to raise upwards of $10 billion through bond sales. Mexico is potentially looking at an $18 billion haul. Analysts at Morgan Stanley predict that developing nations will issue close to $165 billion in bonds this year, marking a significant 20 percent increase from the previous year.