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Kuwait raised over $11 billion in bond sales as investors pile into Gulf debt

Kuwait, the world's largest oil producer, has raised $11.25bn from a three part bond issue, which attracted a large number of investors for its first U.S. Dollar issue since 2017. This marks a strong return on global debt markets following years of political gridlock in Kuwait.

The Gulf State was the last sovereign in the region to tap into the bond market. Strong global appetite for bonds and low borrowing costs enable governments to diversify their funding sources and plug budget deficits, as well as invest in economic diversification.

Kuwait sold $3.25bn in a portion of three years at 40 basis points over U.S. Treasuries. $3bn in a portion of five years at 40 bps and $5bn in a portion for ten years at 50bps.

Fixed-income news service IFR reported that the order books at launch were more than $23 billion, which allowed prices to be tightened from initial guidance.

Investors were reassured by the low level of debt in Kuwait, despite concerns over its governance, public finances and oil dependency. Justin Alexander, Gulf analyst at GlobalSource Partners and director at Khalij Economics, confirmed this.

Kuwait's estimated sovereign wealth assets are more than $1 trillion. Kuwait does not reveal exact figures.

In March, it passed a new law on public debt after the old one had expired. The borrowing limit was raised to 30 billion dinars (98.24 billion dollars) from the previous 10 billion dinars and the option of longer terms for borrowing was also included.

Kuwait's directly-elected parliament and appointed governments have been in conflict for years, preventing the passage of this law as well as other reforms. Last year, the emir disbanded parliament for up to 4 years. This allowed the government to implement reforms.

Oil revenue was almost 90% of the government's revenue last year, despite plans to diversify away from hydrocarbons. (Reporting and editing by Jamie Freed; Rachna uppal)

(source: Reuters)