Azernews.Az

By Bloomberg

Saudi Arabia’s central bank set pricing for a bond issue at the low-end of guidance as OPEC’s biggest producer seeks to fund its budget deficit after oil prices plunged, according to two people familiar with the matter.

The Saudi Arabian Monetary Authority is selling five-year debt at 1.92 percent, or 32 basis points above U.S. treasuries with a similar maturity, they said. Seven-year debt is priced at 2.34 percent and 10-year debt at 2.65 percent, according to the people, who asked not to be identified because the information hasn’t been made public. The final size of the auction hasn’t been confirmed, they said. Saudi Arabia was aiming to raise as much as 20 billion riyals ($5.3 billion) at today’s auction, two people said last week.

The kingdom is turning to the bond markets for the first time since 2007 as a more than 50 percent drop in oil price puts pressure on the nation’s finances. Income from oil exports accounts for more than 90 percent of government revenue. Saudi Arabia’s budget deficit may widen to 20 percent of gross domestic product this year, the International Monetary Fund estimates.

SAMA, as the central bank is known, set initial price guidance at between 33 basis points and 38 basis points above similar maturity U.S. Treasuries for the five-year tranche, two people told Bloomberg on Aug. 6.

The seven-year notes sold 39 basis points above similar treasuries, while the 10-year debt was issued at 46 basis points above treasuries, the people said today. That compares with a price guidance on the seven-year segment of between 39 and 44 basis points and 45 and 50 basis points for the 10-year securities, according to what people familiar with the matter told Bloomberg last week.

SAMA’s head of public relations didn’t immediately respond to calls seeking comment.