Oman’s new $2 billion bond disappointed on Thursday, with demand hit by worries about the country’s worsening credit trajectory and wider market jitters ahead of the US elections on November 3.
The oil-producing Gulf state, rated below investment grade by all the major credit agencies, saw its 12-year issue sink as much as 2.5 cents in initial trading before easing back, while the seven-year bond shed 1.5 cents.
“Let’s not forget we have a very unique election coming up in two weeks,” said Daniel Moreno, head of global emerging market debt at Mirabaud Asset Management. “I am not surprised that investors do not want to engage with the riskier part of the universe at this point.”
Turkey’s sovereign investment fund and Ukraine’s Naftogaz chose this week to delay dollar bond sales due to the market volatility.
Oman’s return to the bond market was viewed as a gauge of its ability to persuade investors that it was serious about enacting long-waited fiscal reforms after Sultan Haitham came to power as ruler in January.
On Thursday he approved a 2020-2024 fiscal plan aimed at raising income from non-oil sectors, state media reported.
The country faces a budgetary deficit over 15 percent on average in the next five years, said Alberto Bigolin, head of MENA fixed income at StoneX.
“With oil at these levels, and lack of substantial reforms, I believe it would be more difficult and expensive for the country to finance itself,” he said.
The timing of Oman’s first issue this year was not helped by its latest sovereign downgrade by S&P Global last week.
In a sign of the subdued appetite for the issue, when Bahrain, the other junk country in the Gulf, issued $2 billion last month it got over $7.6 billion in orders. By comparison, the combined books for Oman were over $3.8 billion yesterday.
“What did not help is Oman’s credit trajectory,” said Raza Agha, head of emerging markets credit strategy at Legal & General Investment Management, noting Oman’s efforts to improve its situation.