Chasing yields, foreign investors pile up in debut Kuwait bond issue

16/03/2017 07:41 AST

A chase for yields triggered massive demand for Kuwaiti bonds. Foreign investors, chasing attractive returns and seeking diversification, were major investors in $8 billion debut sovereign from Kuwait, an indication of the robust demand for Gulf issuances.

On Wednesday, a 10-year US treasury yielded 2.58 per cent compared to 3.52 per cent from Kuwait, rated AA by S&P, bonds for a similar tenor. A 10-year China, rated by AA- by S&P, sovereign gave a return of 3.55 per cent.

"The Kuwait bonds was well received with strong demand. You get AA rated bonds at higher yields than US bonds, which provides nice diversification away from European markets and also less US correlation," Simon Fasdal, head of the Fixed Income Trading desk at Saxo Bank told Gulf News over an email. The five-year Kuwait bonds were priced at a yield of 2.887 per cent.

Perspective

About 70 per cent of the investors for the 5-year and 10-year bonds came in from Europe, United Kingdom and the United States followed by a fourth from Middle East and North Africa. Bids of about $29 billion (Dh106.3 billion) for $8 billion bond and from 778 investors. "$8 billion is not a huge amount, so obviously from the perspective of international investor the supply was small considering the demand," Anita Yadav, senior director, global markets and treasury at Emirates NBD said.

The robust response came after a similar response for the bond issue from Abu Dhabi, Qatar, Saudi Arabia, which made a beeline to issue bonds ahead of a rate hike from the Federal Reserve.

"Sentiment on GCC bonds seems to have stabilised in the last few months because the government is doing everything it can in terms of removing the budget deficit, and have taken other steps. So all stars were aligned for the Kuwaiti bonds," Yadav added.

Gulfnews