Saudi Arabia Tests Global Confidence by Issuing Sukuk Worth Five Times Demand

Bloomberg – Saudi Arabia’s first dollar-denominated sovereign sukuk issuance of the year attracted orders totaling approximately $16.5 billion, surpassing the offering size by more than five times, signaling investor confidence in the kingdom’s economy despite a wave of selling that swept through global bond markets.

The strong demand allowed the government to raise $3.25 billion on Tuesday, according to a statement from the National Debt Management Center, with yield margins on two tranches reduced by about 30 basis points compared to initial indicative levels, Bloomberg data showed.

The center said in a statement that the kingdom borrowed $1.25 billion through five-year sukuk and $2 billion through a 10-year tranche.

The size of the orders gained additional significance given the timing of the issuance, which came amid a sell-off in international bond markets that pushed government debt yields higher in several advanced and emerging economies. Rising oil prices due to the Iran war heightened inflation concerns, coinciding with growing investor bets on the likelihood of the US Federal Reserve raising interest rates later in September, which reduces the attractiveness of currently traded bonds.

The offering is the first dollar-denominated Saudi sovereign sukuk in 2026, according to Bloomberg data, after the kingdom’s borrowing since the beginning of the year focused on conventional bonds and local sukuk.

The offering also followed the center’s announcement that it had completed about 90 percent of its financing needs before the outbreak of the war, indicating that the kingdom was not under pressure to expand the offering size at the expense of pricing. The government plans to use the sukuk proceeds to finance budgetary needs.