Increased demand driven by bond index inclusion has seen debt issuance in GCC countries this year rise to record levels.
In the second quarter of the year, issuance reached $40 billion, breaking the previous record of $32 billion reached in the previous quarter.
Total outstanding debt in the GCC has risen to $501 billion, up from $478 billion in the first quarter, according to National Bank of Kuwait (NBK).
“Issuance was dominated by sovereigns and quasi-sovereigns, with funding for strategic investments by sovereign wealth funds and state-owned enterprises a strong driver,” stated the NBK research report. “In addition, a large volume of maturing debt has likely helped ramp-up new issuance.”
Issuance was dominated by Saudi Arabia, accounting for $28.6 billion, including one $12 billion bond issued by Saudi Aramco ahead of its IPO scheduled for 2021.
In addition, Oman made its foray into the international bond market, issuing a $3 billion sovereign bond.
Regional demand for GCC bonds has been supported by the imminent inclusion of multiple GCC sovereigns in the JP Morgan Emerging markets Bond Index, while investors have been “relatively unswayed” by recent geopolitical tension in the Gulf, stated NBK.
The banks also expects issuance to remain strong for the remainder of the year, citing the low global and regional borrowing costs which are set to decline further and the “solid” foreign investor appetite.
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