Bahrain plans a sovereign bond targeting the US market by the summer, its central bank said on Tuesday, in a sign the kingdom is confident it can attract international investors.

It has mandated JP Morgan, Citi, Standard Chartered and Gulf International Bank to arrange the bond, three sources familiar with the matter said. The bond would be a conventional issue and not an Islamic one, two of the sources said.

'Bahrain plans to issue a sovereign bond, with the issue size and tenor to be announced later,' a central bank spokesperson told Reuters.

The debt will be issued under a regulatory framework allowing investment by institutions in the US as well as by other investors globally. The central bank did not provide more details.

IFR Markets, a unit of Thomson Reuters, said earlier on Tuesday that Bahrain planned to sell a $1.25 billion bond with a maturity of seven or 10 years, no later than the second week of June.

Bahrain invited proposals to banks last month but has yet to announce which lenders will handle the sale.

A senior government source told Reuters in April that a bond was not imminent despite the requests to banks, adding that Bahrain was a regular issuer and that the political situation in the kingdom would not negatively influence investor appetite.

Last November, the island kingdom, drew $1.8 billion in demand for a $750 million, seven-year sukuk, its first sovereign issue since March 2010, pricing it to yield 6.273 percent. The order book was made up mainly of Middle East investors, helped by its Islamic structure.

If the size and the timing of the new bond is confirmed, it would take the state's borrowing to as much as $2 billion in just over six months.

Bahrain had initially looked to sell a $1 billion conventional bond at the beginning of 2011 but was forced to postpone due to its worst turmoil since the 1990s - eventually suppressed with the help of martial law and Saudi troops.
 But clashes between protesters and riot police have escalated again in recent months.

Five-year Bahrain credit default swaps, which reflect how investors assess the risk that a country will not be able to pay back its obligations, have been easing gradually this year to around 361 basis points on Tuesday from a peak of 408 points at the end of January, according to Markit data.

The turmoil prompted Bahrain, whose credit rating has been downgraded by up to three notches in the last year, to boost government spending by 22 percent from its original 2011 target to 3.1 billion dinars ($8.2 billion), though robust oil prices have been helping to ease budget strains.     

For 2012, the government had forecast a deficit of 8.8 percent of GDP due to slightly lower spending, which at 3.1 billion dinars was still 14 percent higher than the original 2012 plan. - Reuters