Ammon News - AMMONNEWS - Abu Dhabi and Jordan both launched 30-year dollar debt sales on Monday, becoming the latest Middle Eastern issuers to tap strong investor demand for a region that has borrowed record amounts on international markets this year.

Abu Dhabi is selling dollar-denominated bonds split into maturities of five, 10 and 30 years while the kingdom of Jordan is selling a $1bn 30-year dollar bond at a yield of 7.5 per cent.

Debt issuance from Middle Eastern countries has reached a record high in 2017 with $48bn of sales so far, not including this week’s business — surpassing the previous record of $37bn last year.


The $48bn sales have been US dollar-denominated deals. Both the Jordanian dinar and the dirham, the local currency of the United Arab Emirates (of which Abu Dhabi is the capital) are pegged to the world’s foremost reserve currency.

The latest debt deals come at a time when the US dollar has been rebounding after retreating for much of the year against emerging markets.

A weaker dollar in conjunction with signs of stronger EM economic growth has underpinned strong flows into the sector and triggered robust debt sales by countries and companies.

The deals come just days after Saudi Arabia sold $12.5bn of bonds in the largest EM debt sale of the year for 2017. The deal was split into five-, 10- and 30-year tranches, with the longer dated debt pricing at just 180 basis points over equivalent US Treasuries.

The price guidance for AA-rated Abu Dhabi’s long-dated tranche is about 150 basis points over the equivalent US Treasuries, below the borrowing costs last week of the A plus-rated Saudi Arabia, its close ally.

Saudi Arabia has increased its borrowing as a period of weaker oil prices sparking an Opec production ceiling has pressured the kingdom’s finances.

Similarly, Abu Dhabi has been using a combination of debt issuance and dividends from government companies and wealth funds to plug budget deficits over the past few years due to the sustained slump in oil prices.

Abu Dhabi Commercial Bank is forecasting a “relatively contained” fiscal deficit of 2 to 2.5 per cent of gross domestic product this year.

Other economists have forecast a return to fiscal surplus in 2017 with oil prices rising above $50 a barrel. The emirate is “on track to record fiscal surpluses”, according to a note published by Bank of America Merrill Lynch in July.

The rush of Middle Eastern borrowers to the market attracted attention over the summer with Iraq issuing its first independent bond sale in a decade, drawing $6.6bn of demand for $1bn of paper.

Jordan previously tapped international capital markets in April this year, issuing a $500m bond. Oman, Bahrain and Kuwait have also issued sovereign debt in 2017.

Both Jordan and Abu Dhabi have hired JPMorgan and Citi for their debt sales while Bank of America Merrill Lynch is also on the Abu Dhabi deal, along with HSBC and First Abu Dhabi Bank.

*FT