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High-Hyped $12B Aramco Bond Sees Disappointing First-Day Moves

After seeing significant interest with an unprecedented $100 billion in orders on Tuesday, Aramco’s bond saw but mild upward moves on Wednesday, its first day out of the gate.

The lackluster response suggests, according to Reuters sources, that the initial demand was inflated.

Despite the $100 billion in orders, only $12 billion of debt was issued—this huge disparity in the two led many to believe that first-day activity would have been stronger than it was. The reason for this, according to a trader who spoke to Reuters, is that many had already anticipated that the demand would be significant and orders would go unfilled, so traders placed additional orders in hopes of elbowing their way past other traders who were also scrambling for a piece of the Aramco pie.

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Still an overall success, if not somewhat disappointing, the bond sale has dispelled any notion that traders are overly concerned with getting into bed with Saudi Aramco, which for all intents and purposes is the same thing as The Kingdom of Saudi Arabia.

Some see yesterday’s bond issuance success as a measure of the interest that Aramco’s massive IPO would generate, should the oil company ever overcome the host of challenges that come with such an undertaking. Others think it’s possible that the IPO will not take place at all now that Aramco has pulled off the bond in what not only could be construed as a face-saving move, but as taking the place of the IPO’s cash generating purpose. The hope? That the IPO would generate a hard-fought $100 billion—harder than issuing bonds, anyway.

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The official word on Aramco’s IPO is that it is still on track, but quite a ways out, in 2021.

The newly issued bonds slipped early on Wednesday, but still was one of the most heavily traded bonds, according to the Financial Times.

By Julianne Geiger for Oilprice.com

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  • Hugh Williams on April 11 2019 said:
    Another possibility is that the sellers of the bond put in orders to force the price up.

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