In what has been a bumper couple of weeks for investment grade issuance, Abu Dhabi Government came to the market yesterday with a USD 7bn three tranche deal. As Aa2/AA rated Abu Dhabi is considered one of the best issuers in the region, the 5,10 and 30-year deals were over 6.2x oversubscribed having received USD44bn worth of combined orders. As with other recent bond offerings the syndicate left attractive spreads on the table, ~30 bps above the current curve: the USD 2bn, 5-year bonds were issued at 220bps over USTs, the USD 2bn, 10-year notes at 240bps over and the USD 3bn 30-year offering was launched with a 4.1% yield.
The liquid, high-grade Abu Dhabi bonds already in issuance witnessed an aggressive sell-off last month (alongside most asset classes), having also been some of the largest contributors to positive performance last year and in the first two month of the year. The bonds have bounced off the March lows, the 4.125% 2047s for example are up almost 10 points and continue to offer an attractive risk-adjusted return and yield of 22.8% with over 3.2 notches of credit cushion.
Both the Qatar and Abu Dhabi deals came ahead of the tentative OPEC+ meeting expected to take place as we write. Brent has bounced off expectations that the price war between Saudi Arabia and Russia will come to an end, thus resulting in an agreement to daily cuts between the cartel and its members. It has been suggested that Russia is willing to cut 1.6m bpd from its first quarter levels, there have still been no comments from Saudi as to whether the Kingdom is willing to curb output. The Saudi-chaired G20 oil minister webinar set for Friday may give more clues as to the US’ involvement, with Saudi looking for US shale producers to also cut production.