Saudi Arabia has officially launched its much anticipated, first international bond sale on Wednesday, as the kingdom turns to debt markets to help ease a fiscal squeeze from the two-year slump in oil prices, which has slammed not only the country's economy, leading to a period of unprecedented austerity resulting in widespread job cuts and a slowdown in local construction and infrastructure projects, but also has impacted the country's bank sector where the largest bank has seen its shares plunge to all time lows, as bets on a currency devaluation continue to rise.

As Bloomberg reported moments ago, the sale has officially started, with Saudi Arabia seeking to sell between $10 and $15 billion in three tranches, a 5Y, 10Y and 30Y offering. Pricing is expected to take place tomorrow, Oct. 19; with the books set to close at 5pm in NYT on Tuesday October 15.  Tentative pricing will be as follows:

Issuer: Kingdom of Saudi Arabia acting through the Ministry of Finance

• 5Y: +160 area
• 10Y: +185 area
• 30Y: +235 area
• Expected Ratings: A1/AA- (Moody’s/Fitch)
• Format: 144A/RegS sr unsecured notes
• Books: C, HSBC, JPM
• Settlement: T+5

According to the FT, Riyadh is thought to be targeting a sale between $10bn and $15bn, making it the largest issue of international debt in the Middle East and a potential rival to Argentina’s record-breaking $16.5bn emerging market bond sale earlier this year.

Bankers said strong demand is expected for the debut bond, which comes amid heavy buying of other emerging market debt, including Mexico, Qatar and Argentina. “All going well they should print later in the week,” said one banker.

Investors who have met Saudi delegates say they expect the bonds — likely to be split into five, 10 and 30-year maturities — to be issued with a yield anywhere between 160 and 200 basis points over equivalent US government benchmarks.

The kingdom’s first international bond is part of a radical plan to wean the economy off its reliance on oil and was first announced in November 2015, as oil prices fell to $50 a barrel from $115 a barrel the previous year.

An interesting anecdote comes from Bloomberg which informs that while Saudi government officials talked at length about their vision for transforming the economy, when it came to an oil price increasingly influenced by Iran and the proxy war in Yemen they were less forthcoming.

“Every time anyone in our meeting asked about oil they pushed back,” said Gregory Saichin, chief investment officer for emerging-market bonds at Allianz Global Investors. He attended the investor day in London, the first of four that end in New York this week after Los Angeles and Boston. "The fact that they refused to take questions on oil prices or how much is achievable on budget rationalization have left investors with half a picture."

Still, we anticipate there to be substantial demand and the issue to be massively oversubcribed potentially leading to an upsizing of the issue to $20 billion.

Yield-starved buyers of the new issues will be funding the Kingdom's increasingly empty cash coffers and its dwindling foreign reserves. As Bloomberg adds, "that they are having to tap the market at all is testament to how far their finances have deteriorated. The budget deficit has swollen to the widest in more than two decades and the government has eaten into foreign currency reserves and been forced to raise about $63 billion from local bond sales. The state is cutting spending and salaries as part of Saudi Deputy Crown Prince Mohammed bin Salman’s unprecedented overhaul, which also includes a planned initial public offering of oil giant Saudi Aramco."

It is unclear how much of the deal proceeds will be used to fund the ongoing Saudi military campaign in Yemen:

Lurking in the background is a deepening conflict next door in Yemen with Iranian-backed rebels. A Saudi-led air attack on a funeral in Yemen’s capital Sana’a that killed more than 100 people this month was based on false information, an investigation team said last week.

"The Saudi engagement in Yemen and Syria will signify higher expenses for the government," said Pictet portfolio manager Andres Sanchez Balcazar, whose colleague attended the roadshow in London. "We don’t think that’s going to be a great driver for the credit.”

And then there was the paradoxical announcement last week that Japan's SoftBank is seeking to launch a $100 billion tech fund with the cash strapped Saudi Arabia, perhaps an attempt by the Kingdom to telegraph to markets that it doesn't really need to cash. It does.