By Rory Jones in Dubai and Avantika Chilkoti in London 

Qatar sold $10 billion in U.S. dollar-denominated bonds on Tuesday, the first Persian Gulf state to tap the debt markets since the headwinds of the coronavirus pandemic and a collapse in oil prices tightened budgets across the region.

The sale, a test of demand among investors for further bonds from other oil-exporting Gulf countries, came after Saudi Arabia last month launched an oil-price war with Russia, causing a collapse in prices and driving up the cost of borrowing.

Qatar's three-tranche bond sale received $44 billion in orders, according to a document from one of the banks on the deal. It indicates a recovering investor appetite for risk after a recent selloff and could pave the way for other Gulf states to raise debt.

Qatar didn't respond to a request for comment on the issue, which is expected to close later Tuesday.

Most Gulf countries have sought to diversify their economies away from oil in recent years but still depend on crude sales to fund their budgets. They are expected to issue billions of dollars of debt to help fund spending predicated on higher oil prices, bankers say.

Expenditures are also expected to increase as governments roll out stimulus measures to support economies that are under lockdown to stem the spread of the new coronavirus.

"This is a significant tailwind for the region," Meno Stroemer, fund manager at Switzerland-based Fisch Asset Management, said of Qatar's successful sale.

Members of the Gulf Cooperation Council, or GCC, a group of nations including Saudi Arabia, Qatar, the United Arab Emirates, Oman, Bahrain and Kuwait, have become some of the biggest issuers of sovereign debt globally over the past five years since the previous oil-price crash in 2014. That has raised concerns about whether Gulf states can service growing debts and prompted some investors to bet against the bonds.

Doha was seeking to get out first before a glut of further issuance, said Peter Kisler, portfolio manager at North Asset Management, who put in an order for the Qatari sovereign bonds.

"These issues tend to be large, so if five other countries have issued $10 billion each before you, it'll be more difficult to get something done than if you're the first," Mr. Kisler said.

Saudi Arabia last month said it would tap capital markets to help fund a stimulus package prompted by the country's coronavirus lockdown. As a result, King Salman has approved raising a self-imposed limit of debt to gross domestic product from 30% to 50%. The U.A.E., Bahrain and Oman have also launched stimulus packages and are likely to issue bonds this year.

Saudi Arabia has politically and economically isolated Qatar since 2017 and been accused of using the capital markets as a tool in its diplomatic standoff. It rushed out an $11 billion bond sale in April 2018 as Qatar also was courting investors. Riyadh has said it raised bonds for its budget requirements. Despite the Saudi sale, Qatar two days later sold $12 billion of bonds.

On Tuesday, Qatar sold U.S. dollar-denominated bonds in tranches of five, 10 and 30 years. It priced the 5-year tranche at 300 basis points over U.S. Treasurys, the 10-year at 305 basis points over U.S. Treasurys and the 30-year at a yield of 4.4%. The 10-year priced 35 basis points higher than bonds of similar maturities already in the market.

Since oil prices collapsed last month, yields of Qatari and Saudi bonds maturing in 2029 have widened from roughly 1 percentage point above U.S. Treasurys to nearly three times that level, according to investors.

The Saudi-led Organization of the Petroleum Exporting Countries, or OPEC, is expected to convene a virtual meeting on Thursday with other oil-producing nations including Russia, aiming to negotiate a truce in a Saudi-Russia fight for market share. That feud has helped contribute to a 70% drop in oil prices since early March.

Bond investors said Saudi Arabia and other Gulf states might wait to see whether a deal is reached that pushes up oil prices before launching debt issuance, hoping to get a better deal.

"They will all tap the market at some point," said Zeina Rizk, executive director at Arqaam Capital in Dubai. "Some might wait till the oil feud gets resolved. Qatar is probably taking the first-mover advantage."

Write to Rory Jones at and Avantika Chilkoti at


(END) Dow Jones Newswires

April 07, 2020 14:28 ET (18:28 GMT)

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