Qatar's plan to issue the bond in riyals will be seen as a benchmark to develop the domestic bond market, and provide a new vehicle to pool the excess liquidity in the Gulf state's banking sector.
"This is a sign that the Qatari markets are gaining depth," said one Doha-based analyst. "This is what the market needs. It will help investors get the diversification they need for their portfolios and give them another instrument to trade on."
"The new managers at the Qatar Exchange have promised us that they will offer more instruments to trade on (sukuk, conventional bonds, ETFs, options, futures) come September. Maybe this is just the beginning," the analyst said.
Finance Minister Yousef Kamal was quoted in the Financial Times as saying that the issue was aimed at diversifying funding away from US dollars, and that the bond sale would include both a conventional and an Islamic component.
"Most of the local banks have a lot of excess cash — huge cash — and they are looking for a good client," Kamal told the newspaper. "We have already allocated each bank its portion."
Qatar, the world's largest gas exporter, issued a $7 billion bond in November, marking the largest sovereign debt issuance in the region.
Though a regional pipeline of international issues is building up once again after slowing in the aftermath of Dubai's debt crisis, recent market volatility has hit primary issuers looking to attract international investors with dollar or euro bonds.
