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Why Qatar’s first sovereign sukuk in nine years is attracting attention

qatar sukuk

The Gulf Arab state plans to issue a two-tranche sukuk, with early price talk in the area of 135 basis points over midswaps for the five-year portion and 175 bps over for 10-year paper.


July 10, 2012 4:43 by

The amount of assets made available to back this week’s sukuk suggests Qatar could issue up to $4 billion of paper, though it has no obligation to do so and many in the market expect a smaller amount.


This year’s largest dollar sukuk issue so far is Saudi Electricity Co’s $1.75 billion deal in late March, which Qatar looks able to exceed easily if it chooses.


Several market sources said they expected Qatar’s pricing guidance to tighten before launch.


“They (Qatar) will tighten at least 10 bps…What they are doing is showing generous guidance to get the orders in,” said a fixed income trader at a regional bank.


“Then they will tighten and print big,” he said, predicting Qatar would issue between $2 billion and $3 billion.


Biswajit Dasgupta, head of treasury and trading at Invest AD, said: “We expect that they’ll look to build a really large order book and then tighten the pricing. The market sense is that final pricing will be more or less in line with the current curve for the 2017 maturity, with the sukuk premium making up for this issue’s longer duration.


“We think Qatari banks will be the biggest bidders, although the combination of a high credit rating and the sukuk structure will probably receive decent demand from some Islamic investors out of Asia.”


Qatar’s outstanding conventional bonds have tightened since issue in November. The $2 billion, 3.125 percent five-year portion of its last bond was bid at a yield of around 2.2 percent on Tuesday morning, according to Thomson Reuters data. The $2 billion, 4.5 percent 10-year tranche was at 3.23 percent.

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