Sabic priced Islamic bonds worth up to $1.33 billion at 48 basis points above the three-month Saudi interbank offered rate (Sibor), as demand far outstripped supply.

'The book is strong, demand is way above the maximum limit set for the sale,' a source close to the deal said yesterday.

The world's biggest chemicals firm by market value had previously indicated price guidance of mid-40 to 50 basis points above three-month Sibor for the riyal denominated Islamic bonds (sukuk).

Three-month Sibor is currently at 2.22 per cent.

The company had won approval from Saudi regulators for a sale worth up to SR5 billion ($1.33 billion) and the final size will be determined when books close today, the source said, adding it was unlikely Sabic would apply to raise the ceiling on the sale despite strong demand.

The bonds, denominated in the dollar-pegged Saudi currency, provide an investment vehicle for Saudi investors starved of choice, the source said.

The sale also highlights investor appetite for securities denominated in Gulf currencies - of which all but Kuwait's are pegged to the weak US dollar - amid speculation countries in the region may revalue to stave off rising inflation.

The sukuk sale is Sabic's third, and the five-year bonds were rated A+ by ratings agency Standard & Poor's.-TradeArabia News Service