Abu Dhabi to re-enter eurobond market after 3-yr absence
Abu Dhabi is entering the eurobond market for the first time in roughly three years, a move prompted by diminishing hopes of imminent interest rate cuts in the US, Bloomberg reported on Tuesday.
The affluent emirate, a key member of the United Arab Emirates, is launching a dollar-denominated bond with maturities spanning 5, 10, and 30 years, as indicated by a source familiar with the matter. Specific details, such as the size and yields, are expected to be disclosed later today.
Abu Dhabi’s credit rating, positioned at the third-highest investment grade by major rating agencies, is seizing the opportunity amidst dwindling prospects of immediate rate reductions. This move aligns with the trend of emerging-market bond issuances, which soared at the beginning of the year amid expectations of Federal Reserve easing.
Having a $3 billion bond maturing in September, Abu Dhabi joins other regional players like Saudi Arabia in seeking external financing this year.
Despite the emirate “doesn’t need the money,” according to Mehdi Popotte, senior portfolio manager at Arqaam Capital, the bond issuance serves to uphold market presence. This strategic move anticipates sustained elevated borrowing costs amidst escalating geopolitical tensions.
Moreover, Popotte suggests that Abu Dhabi’s bond sale will likely pave the way for its government-related entities to pursue similar financing later this year.
The bond sale is being managed by Abu Dhabi Commercial Bank PJSC, Citigroup Inc., First Abu Dhabi Bank PJSC, HSBC Holdings Plc, JPMorgan Chase & Co., Morgan Stanley, and Standard Chartered Plc.
Initial indications suggest a spread guidance of around 70 basis points over US Treasuries for the five-year tranche, 85 basis points for the 10-year, and 125 basis points for the longest maturity.
