The steepest refinancing jump is coming to the Gulf’s strongest, lowest-coupon borrowers

The steepest jump in refinancing costs in the Gulf is hitting its strongest credits, not the Dubai developers whose bonds cratered in March. Aramco, DP World, Emaar, and the Sharjah government locked in money at 2.7-3.9% in 2019-21. Rolling that debt at market rates as of 12 October 2026 would cost them roughly 180-335 bps more a year — a steeper increase than the region’s weakest borrowers face — even though investors now charge them less for credit risk than when they first borrowed.

Blame it on US Treasury yields: The 10-year hit a 24-year high of 5.35% intraday on 8 October, and because Gulf currencies are pegged to the USD, regional borrowers pay that increase in full.

“Borrowing costs for all borrowers are 75-200 bps higher, driven primarily by rates,” Abdul Kadir Hussain, managing director of fixed income asset management at Arqaam Capital, tells EnterpriseAM.

And a reckoning is right around the corner: GCC issuers have some USD 491 bn in bonds and sukuk maturing through 2030, peaking at USD 143 bn in 2029, according to Bloomberg data compiled by Kamco Invest.

The UAE alone has USD 46 bn due that year. Within that, more than 725 corporate bonds worth some USD 117 bn mature in 2027-30, and USD 99.4 bn of them are investment grade, Kamco’s data shows.

Aramco sold USD 3 bn of 10-year sukuk at 2.694% in June 2021, when treasuries sat near record lows. Its longest-dated sukuk now yields about 6.1%, Dubai Islamic Bank’s indicative prices show, marking a jump of roughly 335 bps that’s almost entirely treasuries.

Aramco’s credit spread is tighter today. Its 10-year sukuk was priced at 120 bps over treasuries in 2021, against around 80 bps over for its longest-dated paper, according to our calculation based on DIB’s indicative prices.

The same pattern holds true for Emaar, DP World, and Sharjah. Investors demand about 155 bps less over treasuries from Emaar, now rated Baa1/BBB+, than when it issued in 2019. It still faces a refinancing bill roughly 180 bps higher. DP World (+250 bps) and Sharjah (+265 bps) tell the same story on their 2029 sukuk.

“The Treasury curve sets what everyone pays. The balance sheet determines who pays more or less than that,” Patrick Drum, fixed income lead and portfolio manager at Saturna Capital, tells EnterpriseAM.

The peg also rules out a local escape. Three-month EIBOR stood at 4.34% at the end of September, up from 0.62% after the Fed’s March 2020 cut, so swapping bonds for bank loans buys no relief. Because Gulf central banks move in step with the Fed, “the Gulf gets less insulation from US rates than a floating-currency market might,” Drum notes.

The upside is that Gulf sovereigns’ revenues and debts are effectively USD-denominated, which spares them the exchange-rate shocks that hit elsewhere in emerging markets.

Investors haven’t lost faith in the region’s best names. “Spreads are pretty much back where they were before the war after seeing a sharp war-led spike in March-2026,” Junaid Ansari, head of investment strategy and research at Kamco Invest, tells EnterpriseAM. “The better-rated corporates and GREs are pricing at roughly 100 to 130 bps over treasuries again.” That’s a turnaround from August, when UAE corporate spreads were wider than at the war’s peak.

Qatar is the exception: Doha’s 10-year was priced at 65 bps over Treasuries on 21 September 2026, against 20 bps in November 2025 due to the war’s longer-term hit to Qatar’s LNG export capacity.

Who can absorb the step-up

For the largest issues, the extra cost is small against earnings. Aramco’s additional c. USD 100 mn a year is under 0.1% of its 1H 2026 net income, on an annualized basis. Emaar booked AED 998 mn in net finance income during the period, earnings more on its cash than it pays on its debt. “A higher coupon on a small stock of debt is a manageable cost, not a solvency question,” Drum argues.

Further down the ratings scale, the sums are larger against what issuers already spend. Sharjah, rated Ba1/BBB-, would add about AED 159 mn a year just by rolling its 2028 and 2029 sukuk. That’s roughly 2.4% of the AED 6.7 bn it has budgeted for loan repayments and interest in 2026. Bahrain, rated B, already pays upward of 7% for 10-year money. “The ones who’ll feel it most are Bahrain … high-yield corporates, and real estate developers,” Ansari adds.

The riskiest borrowers got off lightest

Most Dubai high-yield developers sold their older sukuk at 8-9.6% in 2022-24, so refinancing costs them little more than they already pay. At current prices, Damac’s and Arada’s 2027 sukuk would actually refinance about 40 bps cheaper. “As a percentage of the higher yield that they have to pay anyway, the move higher is less than for IG borrowers,” Hussain explains.

Access is the bigger constraint for them: High-yield borrowers “face higher costs and some will not even be able to access the market right now,” Hussain warns. “Second-tier Dubai Real Estate developers will face a more challenging market when it comes to new issues.”

Binghatti faces the nearest test of that access. Its four sukuk trade at roughly 13-15%, and a USD 500 mn, 9.625% sukuk falls due on 28 February 2027. Moody’s put the developer on review for downgrade in August after unrestricted cash fell to AED 393 mn by end-June, about a fifth of the AED 1.84 bn principal. Binghatti points to AED 10.2 bn in escrow (ring-fenced for projects), some AED 2.4 bn in handover inflows expected through 2026, and first-half profit up 64% to AED 3 bn.

Sukuk lacks a deep pool of distressed-debt investors, Drum notes, so any spread pressure from the maturity wall “is most likely to show among high-yield issuers.” High yield makes up USD 17.2 bn of the corporate bonds maturing in 2027-30, Kamco’s data shows.

Issuers are moving early

Top issuers aren’t waiting for the Fed, which hiked on 16 September for the first time in three years. In September alone, Saudi Arabia returned to the sukuk market, DP World refinanced its EUR notes and Qatar raised USD 3 bn. Ansari sees a rising probability of a third Fed hike in 2027 and expects more issuers to follow: “The current tight spreads and massive investor appetite make prefunding too attractive to pass up.”

Banks are already paying up. DIB will redeem its 3.375% AT1 next Monday, 19 October. When it was sold in 2021, it was the lowest-priced USD AT1 sukuk in the world. Its newest AT1, sold in June, carries 6.25%. In Kuwait, Warba Bank’s 4% AT1 reaches its first call on 29 November.

Whether the largest borrowers refinance at all is contested. Ansari reckons many of these borrowers “don’t actually need to roll the debt,” arguing that sovereigns and the big GREs can repay from buffers built during the last oil cycle. Hussain is less convinced. “As long as access is available we expect most will refinance,” he says. And that access is thinner than it was: “Asian buyers in particular have become very selective on regional borrowers due to the geopolitical situation.”