The total issuance of debt securities witnessed a strong pick up during the first quarter which grew by 2 per cent over last year to hit $16.7 billion on the back of healthy activity by the non-financial sector in Saudi and UAE banks, said a report.

The UAE, Qatar, and Saudi Arabia continue to account for the majority of the region’s issued debt, with total outstanding securities for these three countries amounting to $99 billion, $69 billion, and $38 billion, respectively, stated the report by National Bank of Kuwait.

Total issuance in the first quarter was driven primarily by the non-financial sector (corporates), with the majority of the push coming from Saudi Arabia, the top Kuwaiti lender said in its report.

Issuance by Saudi corporates amounted to $5.4 billion, or 32 per cent of all new GCC debt issued during the period. Saudi Electrical Company and Sadara dominated the Kingdom's private sector issuance, while Emirates Airlines and Ooredoo drove debt growth in the UAE and Qatar, respectively.

The new debt issues in the first quarter, especially by corporates, tended to have longer tenors, lengthening the average maturity of outstanding bonds.  The UAE led the way with $7.8 billion worth of issues, followed by Saudi Arabia ($5.4 billion), and Qatar ($1.3 billion).

According to NBK, the total outstanding GCC fixed income instruments surged to hit $231.8 billion at the end of the first quarter, up $12.8 billion from December 2012.

The report pointed out that the public sector issuance has been declining over the last year. During the first quarter, it dropped to its lowest level since the third quarter of 2011, with issuance during the quarter at $4 billion.

Public sector issuance, which includes sovereign bonds in addition to government-related entities, accounted for less than a quarter of all issuance during the first quarter, down from an average above 60 per cent over the last two years, said the top Kuwaiti lender.

The public sector’s share first fell below 50 per cent in fourth quarter of 2012 for the first time since early 2009 and has remained there in the first quarter, reflecting a recovering private sector.

According to NBK, the Gulf bond and sukuk are increasingly being issued with longer maturities reflecting increased investor confidence and the search for yield. The average maturity of outstanding GCC debt securities increased by 0.2 years between the fourth quarter of 2012 and the first quarter of this year to reach 5.9 years.

This was driven by the corporate sector which saw 13 issuance at longer maturities than usual, which pushed the weighted average maturity of outstanding corporate debt up by 0.6 to 8.5 years, the report added.-TradeArabia News Service