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Gulf Bond Flurry Sets $102 Billion Record Before U.S. Vote

Gulf Bond Flurry Sets $102 Billion Record Before U.S. Election

A burst of debt deals in the Gulf has pushed issuance to a record in the region as borrowers rush to shore up their oil-dependent budgets before the U.S. presidential vote.

Gulf Cooperation Council sovereigns and corporates have sold the equivalent of $102 billion in debt so far this year, already exceeding the highest full-year figure. On top of that, junk-rated Oman priced a $2 billion sale in two parts on Wednesday, alongside offerings by Qatar Islamic Bank SAQ and the Investment Corporation of Dubai.

Gulf Bond Flurry Sets $102 Billion Record Before U.S. Vote

“The last window of opportunity” before the presidential contest between Donald Trump and Joe Biden is galvanizing issuers, said Sergey Dergachev, a money manager at Union Investment Privatfonds GmbH in Frankfurt. A “worst case” could see a contested result or more social unrest, which would be “very bad for risk sentiment,” he said.

For Saudi Arabia and the UAE, a Biden White House could see a cooling in relations, with greater scrutiny of human rights and a restoration of the diplomatic norms bypassed by Trump.

The twin shock of the coronavirus and low oil prices this year have hit Gulf economies hard, sparking a wave of sales to capitalize on stimulus unleashed by central banks globally. Oman is one of the weaker members of the six-nation GCC and its budget deficit could reach 18% of gross domestic product this year, according to S&P Global Ratings estimates. The sultanate said it’s also in aid talks with Gulf neighbors, according to its bond prospectus.

The GCC comprises Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain. Saudi Arabia’s sovereign sale contributed the most to the amount issued in 2020 for the fifth year in a row.

On the corporate side, Dergachev predicts issues from Shuaa Capital PSC and Arab National Bank will be “very well-received” and expects “solid” sales from companies in the region in 2021. His fund participated in deals from companies including Saudi Electricity Co. and Masraf Al Rayan QSC.

“For sovereigns, it is more about budget financing as pressure is high due to low oil prices,” as well as “exploiting the relative strength of GCC sovereigns versus many other emerging markets,” he said.

©2020 Bloomberg L.P.