Kuwait Bond Sale Bids Top $17.8 Billion Even as Iran Strikes
(Bloomberg) -- Kuwait has drawn around $17.8 billion of investor orders for a benchmark dollar bond sale on Wednesday, highlighting resilient demand for the OPEC member’s debt even as it comes under daily missile and drone attacks from Iran.
The Gulf Arab country hired banks including Goldman Sachs Group Inc. and Citigroup Inc. to arrange the three-part deal, with tenors of three, five and 10 years, according to a person familiar with the matter. The final terms may be announced later today.
Sergei Strigo, head of emerging-market fixed income at Amundi expects the sale to raise at least $5 billion.
“The Gulf countries’ ratings support large benchmark deals and demand for investment-grade paper remains strong despite relatively tight spreads,” he said. “Kuwait is a good example of that.”
Kuwait is a key US ally in the Middle East and one of the world’s richest states, thanks to its huge oil reserves and having one of the biggest sovereign wealth funds. Its economy, however, has come under strain this year with Iran bombing it regularly in retaliation for US and Israeli strikes.
Earlier this year, analysts at Goldman estimated Kuwait’s fiscal deficit had soared to almost 40% on an annualized basis, with the closure of the Strait of Hormuz forcing it to halt most oil exports.
Since tensions between the US and Iran flared again around July 7, Kuwait has been targeted more than any other country by Tehran. US bases, as well as Kuwaiti power and water plants, have been damaged.
That’s caused Kuwait’s spreads — or the premium to US Treasuries that investors demand — to jump. They remain among the tightest in emerging markets, reflecting the country’s high credit rating.
“They would like to print as much as they can,” said Amol Shitole, head of fixed income at Mashreq Capital. “I think $6 billion to $8 billion can be easily absorbed given elevated reference US Treasury yields and attractive spreads on top of that.”
With the new bonds, Kuwait has set pricing at 70 basis points above Treasuries for the three-year debt and 85 basis points for the 10-year tranche, according to the person.
This latest issuance reinforces the nation’s commitment to maintaining a regular and predictable presence in international capital markets, according to another person familiar with the matter.
After a hiatus of eight years, Kuwait reentered the international bond market late last year, raising $11.25 billion and attracting orders from investors that peaked at almost $30 billion.
With that deal, Kuwait sold three-year bonds with a spread of 40 basis points and 10-year paper at 50 basis points. The spreads on the latest bonds may come down from the initial guidance, depending on how strong demand is.
(Updates with latest pricing details, investor bids)
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