| DUBAI, March 14
DUBAI, March 14 Kuwait’s $8 billion debut
international bond issue traded close to Abu Dhabi bonds in the
secondary market on Tuesday, suggesting the Gulf's gold standard
for sovereign debt now has competition for investors' attention.
On Monday, Kuwait's government sold $3.5 billion of
five-year bonds and $4.5 billion of 10-year debt. Orders for the
issue totalled a massive $29 billion, bankers said.
By Tuesday, the five-year bond had tightened to yield 2.85
percent, compared to 2.88 percent at issuance, while the 10-year
was yielding 3.56 percent against an initial 3.62 percent.
That put Kuwait inside the secondary market yields of
similar bonds issued by Qatar's government and only slightly
wide of Abu Dhabi, which was previously considered the safest
credit in the region.
Abu Dhabi’s five-year paper maturing in 2021
was yielding 2.57 percent on Tuesday while its 10-year, 2026
notes were at 3.39 percent. For comparison
purposes, traders added between 10 and 15 basis points to those
yields to account for the Abu Dhabi paper's shorter time to
Kuwait's government, one of the region's strongest
financially, had previously indicated it would borrow up to
about $10 billion internationally. But a partial recovery of oil
prices over the past few months reduced its need to borrow.
The International Monetary Fund projects Kuwait will be the
only one of the six Gulf Cooperation Council States to run a
fiscal surplus this year.
However, Kuwait’s decision to make a sizeable bond issue now
made sense in the context of an expected interest rate increase
by the U.S. Federal Reserve later this week, and given
expectations for more hikes this year, some fund managers said.
Given the tight pricing of the bond issue and the fact that
Kuwait may not need to issue again for a long time, some
managers suggested the Kuwaiti paper could become relatively
illiquid, with Asian investors likely to buy and hold the
10-year paper and regional accounts doing the same for the
Citigroup, HSBC and JP Morgan coordinated the deal. Kuwait
is rated AA by both Fitch and Standard & Poor's.
(Editing by Andrew Torchia)