DUBAI  - Saudi Arabia has raised $5 billion in bonds after receiving around $20 billion in orders, a sign that an escalation in geopolitical tensions in the Gulf has not deterred investors looking for high returns amid low global rates.

The kingdom has issued bonds with maturities of seven, 12 and 35 years, a document by one of the banks leading the deal showed, as part of plans to raise $32 billion worth of debt this year as it seeks new financing channels in an era of lower oil prices.

The bond sale is the first by a Gulf government this year and follows a rise in geopolitical tensions in the region after Iran and the United States, Saudi Arabia's ally, traded military strikes earlier this month.

Riyadh raised $1.25 billion in seven-year bonds offering 85 basis points over U.S. Treasuries, $1 billion in 12-year notes with a spread of 110 basis points over the benchmark, and $2.75 billion in 35-year bonds, the kingdom’s longest international bonds ever, with a 3.84% yield.

Saudi Arabia's dollar bonds, among the most liquid in the region, have been relatively resilient after an attack on the facilities of state-owned oil giant Aramco last year and a U.S. drone strike that killed Iranian military commander Qassem Soleimani this month.

The spreads on offer looked "cheap" when the bond sale began on Tuesday, particularly for the longer dated tranches, said Zeina Rizk, fixed income executive director at Dubai's Arqaam Capital.

"There is definitely a risk premium linked to geopolitical risk, but markets didn’t sell off as much as you would have expected them to after the Aramco attack or after Soleimani’s strike. Initial price guidance is cheap but it will obviously tighten," she said.

Alberto Bigolin, executive director and head of MENA fixed income at Tellimer, said the initial premium was erased completely during the sale process.

"Both the action on the Saudi sovereign curve in the past weeks and the pricing of the new issuance confirm that the demand for Saudi risk is there, despite the heightened geopolitical risk and the recent tensions in the Gulf."

Citigroup, Morgan Stanley and Standard Chartered worked as joint global coordinators and lead managers, while BNP Paribas, HSBC, JPMorgan and NCB Capital have been hired as passive lead managers.

Of Saudi Arabia's total planned debt issuance this year, almost $12 billion will be used to refinance existing local debt and will also be raised locally, a finance ministry official told Reuters last month. 

International debt was expected to account for 45% of the remaining $20 billion-worth of new funds that Riyadh plans to raise.

(Reporting by Davide Barbuscia; Additional reporting by Yousef Saba; Editing by Kim Coghill, Kirsten Donovan) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: davide.barbuscia.reuters.com@reuters.net))