Here's Why Kuwait's Dollar-Bond Debut Was a Hit With Investors

  • OPEC member needs lowest price to avoid budget deficit
  • Kuwait’s current account is also cushioned against price drop

The scramble among investors to buy Kuwait’s first international bond reveals a subtext: the country is better cushioned against oil-price declines than any of its peers.

International Monetary Fund figures show the current oil price, at about $52 barrel, is more than enough for the country to balance its budget and current account, unlike its neighbors. Which is why when the OPEC member raised $8 billion from the sale of five-year and 10-year notes this week, and attracted $29 billion in bids, it paid less than what Qatar, Abu Dhabi and Saudi Arabia offered last year.

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“Kuwait’s mix of breakeven oil price for both the budget and the current account shows it is more protected against a drop in oil,” said Simon Quijano-Evans, an emerging-market strategist at Legal & General Investments Management Ltd. in London. “It also reflects a more cautious stance on the fiscal side and growing expectations that Kuwait may be one of the only countries to have a budget surplus this year.”

Kuwait pledged to be a “prudent” borrower after the bond sale, saying it wants to maintain its current credit grade and ensure the success of its existing issue. The offer has covered the bulk of its funding needs from the international market in 2017, said deputy Prime Minister Anas al-Saleh, who is also the finance minister and chairman of the country’s sovereign wealth fund.

Kuwait, the United Arab Emirates and Qatar are all rated Aa2 at Moody’s Investors Service, the third highest investment grade.