Saudi Arabia’s new sukuk order book hits $20bn

Order books for Saudi Arabia’s $5 billion Islamic bond (sukuk) reached $20 billion, according to news report.

The kingdom, the world’s top oil exporter, sold tranches of $1.25 billion, $1.5 billion and $2.25 billion, reported IFR, a London Stock Exchange Group publication.

The bonds have durations of three, six and 10 years, respectively.

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Spread on the three-year bonds was tightened to 60 basis points (bps) over US Treasury (UST) securities, from 85 bps in indicative pricing.

The spreads on the six and 10-year bonds were lowered to 75 bps and 85 bps over UST, respectively.  

Sukuk are sharia-compliant bonds developed as an alternative to conventional bonds, which are not considered permissible by many Muslims as they pay interest and may finance businesses involved in activities not allowed under Islamic law.

• Saudi Arabia issues $9.6bn sukuk
• Saudi behind increase in foreign currency sukuk deals
• Growth doubts over Islamic finance despite trillions in assets

Ratings agency Moody last week affirmed the kingdom’s credit rating at “A1” due to the significant progress in implementing a broad-based reform agenda since 2016 and the effective implementation of macroeconomic and fiscal policies.

The positive outlook was based on reforms and investments in various non-oil sectors, which led to a decline in the Kingdom’s economic and fiscal reliance on hydrocarbons, the ratings agency said.