The inaugural offering of Islamic bonds by Saudi’s Public Investment Fund (PIF) has garnered significant interest, with demand strong enough to raise $3.5 billion.
According to a bank document published by Reuters, PIF initiated the issuance of Islamic bonds, also known as sukuk, on Wednesday. The offering includes $2.25 billion in five-year sukuk at a spread of 120 basis points over U.S. Treasury bonds, as well as $1.25 billion in 10-year sukuk at a spread of 140 basis points over Treasury bonds.
Read more: Will Saudi’s PIF issue green bonds soon?
As per the document, the five-year sukuk segment generated over $14 billion in demand, while the 10-year segment received orders of more than $10 billion. These figures do not include interest from prominent banks.
According to a previous bank document, PIF commenced the marketing of the instruments with an initial price guidance of 150 basis points over the five-year Treasury and 170 basis points over the 10-year Treasury.
An unnamed fixed income analyst expressed that the bonds appeared to be “highly appealing from the perspective of investors,” Reuters reported.
Investor’s interest
Following the conflict between Israelis and Hamas in Gaza, this release is regarded as a significant gauge of investors’ interest in Middle Eastern bonds.
After successfully raising $5.5 billion through green bonds in February, this issuance represents PIF’s second international sale of the year.
The Fund has selected a group of banks, including Citi, HSBC, JP Morgan, Standard Chartered Bank, Al Rajhi Bank, Bank of America, Crédit Agricole, Deutsche Bank, Emirates NBD, First Abu Dhabi Bank, Goldman Sachs, Mizuho, and SNB Capital, to assist in the issuance.
Diverse investments
The outcomes of the IPO hold the potential to be incorporated into the wide-ranging investments of the Fund, which include significant domestic projects such as NEOM, Red Sea, Qiddiya, and Roshn, as well as global investments. As of the end of the second quarter of this year, the investment portfolio in American companies amounted to $38.9 billion, with Lucid Motors holding the largest position in the Saudi portfolio.
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