First published: 25-May-2026 12:34:41

Sepan Sukriya

Debt capital markets in the Gulf Cooperation Council (GCC) countries began the year with their strongest start ever, raising more than $30 billion in January, led by Saudi Arabia and the UAE, before activity slowed during Ramadan and virtually stopped after the US-Israeli war on Iran.

Nearly two and a half months into the dispute affecting the Gulf Cooperation Council (GCC) countries, issuance volumes remain low. This report examines the trends shaping the market in a conversation with Abdul Salam Alawi, Managing Director and Head of Capital Markets for Central and Eastern Europe, the Middle East, and Africa at Deutsche Bank.

As the war continues, investment bankers in the region are working to prepare issuers, including governments, to take advantage of the market when the next issuance window opens, according to Alawi.

"Geopolitical developments are difficult to predict. Once we see a more stable environment and a de-escalation of the war, exporters will be able to move quickly," he added.

New release premiums reduced

High-quality issuers, including government-related entities and banks, have begun entering the market following early signs of stabilization. New issue premiums are expected to decline from recent weeks' levels, "but will remain higher than what we saw in January. Recent issuances have resulted in a new issue premium of 5-10 basis points," according to Alawi.

Saudi Arabia’s Public Investment Fund raised $7 billion through a three-tranche bond sale earlier this month , with an order book exceeding $20 billion, reflecting strong investor demand and allowing the fund to narrow its pricing range.

Similarly, the $750 million Additional Tier 1 (AT1) bonds issued by Emirates NBD at the end of April were a positive indicator of investor appetite, with subscriptions exceeding twice the amount offered.

Additional Tier 1 (AT1) bonds are expected to pay a higher premium compared to senior debt. Both AT1 and Tier 2 (Tier 2) bonds typically come with a higher premium because they are riskier and more volatile assets, and therefore more sensitive to market fluctuations.

Sovereign entities are ready to issue as demand continues.

Sovereign issuers are well-positioned to capitalize on the market once the opportunity arises. It simply depends on how much they are willing to pay as a new issuance premium.

“Issuers currently prefer medium maturities, given the stable yield curve between 5 and 10 years and the lack of desire to maintain high long-term interest rates. There is still strong demand from local and international investors supporting primary activity in the GCC countries despite the ongoing geopolitical conflict,” according to Alawi.

"Over a longer period, we may see an increase in defense spending, which may stimulate borrowing needs for central governments, potentially leading to higher issuance volumes by sovereign and government-related entities," he added.

Highly volatile sectors halt supply

A slowdown or halt in supply is expected from highly volatile sectors, such as real estate, in the coming quarters. Real estate developers in the GCC rely heavily on debt markets; for example, developers in the UAE issued nearly $3 billion in bonds and sukuk in January and February.

With the start of the war, dollar-denominated bonds and sukuk issued by UAE real estate developers, such as Omniyat, Binghatti, Arada and Sobha, came under pressure, but the declines were partially mitigated after they disclosed strong financial positions and ample liquidity.

"The major real estate developers in the GCC maintain strong cash reserves and liquidity. However, this sector is among the first to face investor concerns during periods of volatility. In light of the large issuances witnessed in recent months, a near-term halt in supply from real estate issuers may not be surprising."

Some of the most recent issues in the sector are trading at a spread of 269 and 297 basis points compared to the end of February.

Debt capital market forecasts

Bond issuance activity in the GCC countries may rebound to levels seen in 2025 and early 2026, following a particularly strong start to the year, according to Alawi.

Although execution windows may close during periods of volatility, as happened in early March, once conditions stabilize and the market reopens, exporters may be quick to seize the opportunity.

"At the same time, investors who have remained on the sidelines are usually quick to re-engage, seeking to deploy their available liquidity. The current interest rate environment remains supportive, with benchmark bond yields at attractive levels and coupons offering enticing value, particularly for high-quality GCC bonds," he added.

"Although liquidity available to investors remains plentiful, issuers may still need to offer a higher issuance premium to attract broader international participation compared to local investors," he added.

Moreover, emerging market bonds have continued to outperform their US counterparts since the beginning of the year, with profit margins for both investment-grade and high-yield bonds declining, reinforcing investor demand for this asset class.

Alawi expects GCC issuers to return to the market with dollar-denominated issuances first, given the more favorable pricing, ample liquidity, and faster execution. Alternative currencies are likely to follow at a later stage.

To view the original report published in English on the Zawya website , click here .

(Prepared by: Seban Skria, Translated by: Shaimaa Hefzy, Contact: zawya.arabic@lseg.com )

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