1Q 2025 saw MENA fixed income markets off to a strong start, according to Mashreq Capital’s latest quarterly outlook (pdf), even as risk sentiment takes a hit globally. The Bloomberg MENA USD Aggregate Bond Index climbed 2.6% in 1Q 2025, reversing a 2.6% drop in the previous quarter and outperforming broader emerging market (EM) debt.

The main draw: Gains were driven by a 40 bps drop in US 10-year treasury yields and steady appetite for the long-duration, high-grade regional bonds. With an average duration of 6.1 years and an A credit rating, MENA bonds continue to offer value, with yields close to 6%, about 100 bps above their five-year average, even as spreads remain tight by historical standards.

Gulf heavyweights did most of the lifting: Saudi Arabia, the UAE, and Qatar drove fixed income gains in 1Q, together contributing 211 bps to overall performance. Sovereigns and government-related entities delivered most of the returns across MENA, accounting for 220 bps in total.

New debt looks to be pouring into the region: Issuance across MENA is picking up speed, with 40% of the total USD 120 bn expected this year already completed by the end of 1Q. Saudi Arabia and the UAE — both at a federal level and from Abu Dhabi — are expected to contribute the lion’s share of supply, whilst Kuwait is set to return to international markets after passing its long-delayed debt law.

Equities underperformed, but the flows didn’t stop: MENA stocks lagged EM peers by 57 bps last quarter, weighed down by soft oil prices. Still, foreign capital continued to flow in: Kuwait surged nearly 10%, Dubai rose 1.7% on the back of strong performance from real estate and bank stocks, and Saudi’s Tadawul gained 0.6%. Abu Dhabi was only up marginally as Adnoc stocks came under pressure.

Mashreq Capital has a more cautious stance for 2Q: The firm remains neutral on MENA fixed income but has trimmed risk, cutting high-beta names and adding modest duration through investment-grade bonds. The shift comes amid rising global volatility, with US trade tariffs and weakened Brent oil prices flagged as key downside risks.

The big picture: The UAE, Qatar, and Oman are expected to outperform thanks to low fiscal breakeven oil prices and solid external positions, according to the report. Oman and Morocco are on upgrade watch, while Bahrain and Sharjah remain underweight amid debt concerns and weaker fundamentals.

It is also backing sectors tied to domestic demand, including infrastructure, real estate, and tech, in markets like the UAE, Saudi Arabia, and increasingly Oman. The firm says structural reforms and policy follow-through are anchoring long-term investor interest in these economies.

EGX30

31,640

+2.6% (YTD: +6.4%)

USD (CBE)

Buy 50.89

Sell 51.02

USD (CIB)

Buy 50.91

Sell 51.01

Interest rates (CBE)

25.00% deposit

26.00% lending

Tadawul

11,764

+0.7% (YTD: -2.3%)

ADX

9392

-0.4% (YTD: -0.3%)

DFM

5163

-0.6% (YTD: +0.1%)

S&P 500

5525

+0.7% (YTD: -6.1%)

FTSE 100

8415

+0.1% (YTD: +3.0%)

Euro Stoxx 50

5154

+0.8% (YTD: +5.3%)

Brent crude

USD 66.87

+0.5%

Natural gas (Nymex)

USD 2.94

+0.2%

Gold

USD 3,298.40

-1.5%

BTC

USD 94,195.60

-0.5% (YTD: +0.8%)

THE CLOSING BELL-

The EGX30 rose 2.6% at Wednesday’s close on turnover of EGP 3.9 bn (13.3% below the 90-day average). Foreign investors were the sole net sellers. The index is up 6.4% YTD.

In the green: Fawry (+6.5%), Beltone Holding (+5.9%), and Egypt Alum (+4.0%).

In the red: Juhayna (-0.6%), Edita (-0.6%), and Emaar Misr (-0.4%).

Tags: