Regional debt markets edge back from the brink

Are regional debt markets thawing? We may be turning a corner on sky-high spreads after a war risk premium that has crept into regional notes since the outbreak of the war. While borrowing costs haven’t fully retreated to pre-war levels, analysts tell EnterpriseAM the market has grown out of a defensive crouch and into a cautious bid-only rally.

“[Spreads] have tightened significantly. We're not back at pre-war levels yet, but we're pretty close on high-yield and investment-grade names,” Zeina Rizk, partner and portfolio manager at Amwal Capital, tells EnterpriseAM. This is a sharp reversal from early April, when Rizk told us that market jitters made it nearly impossible to build order books without offering “meaningful concessions.”

Today, sentiment has flipped. “It looks like there is appetite in the market and [liquidity] is being put to work,” she says.

This comes as part of a broader market recovery (read: this morning’s Planet Finance, below) that has also seen equities rally across the world on optimism that the ceasefire might be extended or turned into a permanent end to the war.

The market hasn’t fully shaken off the risk: A 20-30 bps “geopolitical cushion” remains, “given the fragility of the situation and broader uncertainty in global rates,” Sarah Alyasiri, financial strategist at CFI Financial Global — who accurately predicted that spreads would tighten quickly in a de-escalation scenario — tells us. “The key driver now is not just geopolitics, but also the rates backdrop,” she said. Meanwhile, Rizk noted that it’s too early to quantify the risk premium.

The logic is circular: Higher oil prices, driven by the conflict’s tail-end, could keep inflation sticky, forcing central banks to delay rate cuts — or worse, hike them — which regional issuers have been banking on for 2026.

Call it a side door

“We haven't seen issuers come to market in a normal roadshow,” but sovereigns are aggressively tapping private placements, Rizk tells us. In the last 10 days alone, we’ve seen a flurry of investment-grade activity in Abu Dhabi, Kuwait, and Qatar, which Rizk noted were “flat to the curve, so they did not have to pay up.”

Abu Dhabi has now raised USD 4.5 bn through private debt placements, with the latest USD 2 bn placement taking place this week at a coupon of 4.6%, according to the Financial Times. The issuance was arranged by Goldman Sachs.

“Primary markets need more stability [...] I don’t expect a quick rebound in issuance,” Muhammad Ahsan, senior head of treasury, global markets, investment banking, and international business at Bank Nizwa said. He added that primary activity “will take some more time to revive.” Both Ahsan and Rizk agreed that clarity and durability are key for primary debt markets to fully reopen.

The waiting game

Not everyone is rushing back to the trough. While top-tier sovereigns and energy giants can now move, Saudi gigaprojects, developers, and more leveraged infrastructure firms are still in wait-and-see mode, Alyasiri says. She previously identified these sectors as the “most sensitive” to pricing strikes due to their reliance on phased issuance.

The good news? They have a buffer: Many of these entities — corporates, banks, and real estate developers — front-loaded their 2026 needs during a massive debt spree in 4Q 2025 and early this year, Ahsan previously told us. “[They] are not under immediate funding pressure and prefer to delay issuance rather than lock in higher costs, so the market is reopening but in a selective and gradual way,” Alyasiri said.

The most dangerous trap right now is a lack of differentiation

Current pricing doesn’t distinguish between the strong and weak quasi-sovereign balance sheets, Alyasiri says. The market is currently operating on the assumption that “implicit government support” is a blanket guarantee — an assumption she previously warned would be tested if global liquidity stayed tight.

A selective repricing is looming: “While the ceasefire reduces immediate pressure, it does not fundamentally change the underlying risk dynamic — it just postpones it,” she added. For now, the region is enjoying a post-war honeymoon, but for the debt markets, the real price of money is still being decided.