The Qatar Central Bank is offering QR3bn ($825mn) of government bonds in its first domestic bond sale this year, suggesting liquidity conditions are easing in the banking system pressured by low oil and gas prices.
A central bank official said results of the offer would be known today. It would be the bank’s first such issue since it sold QR6.5bn of conventional bonds and sukuk last November, according to bank data.
The new offer comprises QR1.5bn of three-year bonds at a fixed rate of 2.25%, QR1bn of five-year debt at 2.75%, QR250mn of seven-year debt at 3.25% and QR250mn of 10-year debt at 3.75%, according to an offer document seen by Reuters.
The drop state revenues due to low oil and gas prices have cut flows of money into the banking system this year, pushing money rates up and causing the central bank to cancel several monthly sales of short-term bills.
Since June, however, money rates have come off their highs, with the three-month interbank offered rate quoted at 1.54% yesterday, down from June’s multi-year peak of 1.77% though still up sharply from 1.13% 12 months ago.
The QCB has helped to improve liquidity in recent months by reducing the size of its Treasury bill issuance, a senior banking industry source said. “Liquidity has gradually got better in the past six weeks, though it is still tight. The cost of deposits hasn’t come down,” a Qatari commercial banker said.
Qatar’s government raised $9bn in an international bond issue in late May, and there are signs that authorities may have provided at least some of this money to Qatari banks to ease liquidity pressures.
Government deposits at commercial banks in Qatar rose sharply to QR68bn riyals in June, their highest level in more than a year, from QR57bn riyals in May, according to the latest central bank data.
Deposits by local banks at the central bank jumped to QR14.5bn in June, the highest since July 2015, from QR3.7bn in May, suggesting banks now have more spare cash on hand.