Marcus Ashworth is a Bloomberg Gadfly columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.

Call it beginner's luck. Saudi Arabia raised $17.5 billion in its debut foreign bond sale, the biggest ever by an emerging-market country. 

As a first-time issuer, it's always important to judge the markets mood correctly, even more so when you're likely to become a prolific issuer.

The sale managers had to plan the process carefully so it would leave a nice taste in investors' mouths for future bond issues -- as well as state-owned oil producer Aramco's jumbo initial public offering next year.

Saudi Spread
The kingdom is paying a slight premium compared with Qatar
Source: Bloomberg
Note: Spread is on each country's 10-year bond

It looks like they've done so. More than 1,500 accounts put orders in for the 30-year bond alone. Spreads are tightening, and the five-, ten- and 30-year bonds, which were all issued below par, are heading higher. That's a clear sign of some, but not too much, generosity from a skillful debt capital markets deal team and a not-too-greedy issuer.

Given the banks managing the sale had orders for $67 billion, this could easily have been a bigger offering and priced more aggressively. But by leaving some upside for investors, the window has been left open for future deals.

True, investors demanded a bigger premium over similarly rated Treasuries to hold the Saudi bonds than in recent offerings by Qatar and Abu Dhabhi. That's expected -- Saudi is rated A1 by Moody's, two steps lower than Qatar -- and the gap is narrowing fast.

Collateral Damage
The hit to Saudi government finances from falling oil has pushed the Kingdom to raise money in global bond markets.
Source: Bloomberg

Investors have been prepared to overlook, for now, the damage low oil prices are inflicting on Saudi Arabia's economy. A burgeoning budget deficit is forcing the country prune generous subsidies and wages, and Deputy Crown Prince Mohammed bin Salman is embarking on a radical overhaul to reduce his country's dependence on oil. This first bond offering will go a long way to reassure investors that the shift will be executed professionally.

The short-term benefits are also considerable: relief will be given to the Saudi banking system, which is chronically short of dollars. Now there is a benchmark from which to price bank bonds, lenders will find it far easier to issue bonds themselves. It will also allow the country to start repaying debts to its contractors.

The debut sale clears the way for more of the expected $100 billion of Saudi offerings between now and 2020, and for other issuers in the region as well. Jordan is preparing another bond and others won't be far behind.

It's likely many buyers of the Saudi bond came from Asia. Historically, investors haven't been able to put as much money to work in the Middle East as they would have liked. The Saudi bond helps to change that. Whilst the dollar remains the global reserve currency, that doesn't mean that investors everywhere around the world want to invest in U.S. securities.

Expect a warm welcome when the kingdom returns to the market.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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