Gulf debt issuance fell 17.5% in 3Q as higher rates bit

Gulf borrowers are in no hurry to lock in today’s rates. GCC bond and sukuk issuance fell 17.5% from the previous quarter and 19.4% from a year earlier to USD 42.5 bn in 3Q 2026, the lowest quarterly total since early 2025, Kamco Invest said in its quarterly report (pdf), citing Bloomberg data. With bond prices down and yields up, many issuers are holding out for better levels.

The slowdown tracked a global one: With inflation remaining sticky, oil hovering around or above USD 100 / bbl and the region’s wars grinding on, major central banks turned hawkish. The US Federal Reserve made its first hike since 2023, the European Central Bank and Bank of Japan also raised, and the 10-year US Treasury yield jumped 53.6 bps — and that was in September alone.

Borrowers across the Gulf still drew heavy order books. Kuwait, Saudi Arabia and Qatar each priced sovereign deals covered two to five times over, and Qatar tightened pricing 30 bps on its first international bond of the year. Sukuk rebounded to 44% of regional volume from 15% in 2Q. By market, Saudi Arabia raised the most at USD 15.7 bn, all in sukuk, followed by the UAE at USD 12 bn and Kuwait at USD 8.7 bn. Over nine months, GCC issuance still edged up 3.3% to USD 160 bn.

With bond prices down and yields up, borrowers are less keen to take issuances to market. “Spreads are tight, but overall yields are not attractive for issuers,” Emirates NBD Capital’s head of debt capital, Ritesh Agarwal, told AGBI. “Issuers are less keen on borrowing at current levels, with many preferring to wait until there’s greater stability.”

The cost of that money went up. Coupons rose with global rates — three-month SAIBOR jumped 70.5 bps in September — while the GCC’s USD credit spread widened only modestly, ending the quarter at 88 bps, about half the emerging-market average. Regional indices fell, the MENA Bond index down 4.5% in its worst quarter in four years. Kamco put the sell-off down to higher rates, with Gulf credit quality holding firm, a read the buy side shares. “Despite the war, fixed-income markets are showing no real concern about GCC balance sheets,” Akber Khan, acting CEO at Doha’s AlRayan Investment, told AGBI. “If it costs an additional 1% [compared with six months ago] but a government needs to plug a deficit, then so be it.”

Why it matters: Gulf issuers can still raise large sums at tight spreads, even as the price of doing so climbs. Kamco expects them to keep coming, just on different terms — favoring shorter maturities, more sukuk and carefully timed deals, with higher coupons “a necessary cost of doing business,” its Junaid Ansari told AGBI. With global borrowing on a record run (USD 10.7 tn over nine months, much of the corporate share funding AI) and rates looking higher for longer, funding costs are the number to watch across the region's debt markets into 2027.

MARKETS THIS MORNING-

Asian markets are broadly in the red in early morning trading, with Japan’s Nikkei, South Korea’s Kospi, and the Hang Seng Index all trading down. Futures also point to a similar open on Wall Street, which just came off a losing session as Treasury yields hit fresh highs yesterday.

THE CLOSING BELL-

The DFM fell 0.2% yesterday on turnover of AED 475.2 mn. The index is down 2.5% YTD.

In the green: Spinneys 1961 Holding (+2.5%), Union Properties (+2.3%), and National International Holding Company (+2.3%).

In the red: National Cement Company (-4.9%), National General Ins. Company (-4.2%), and Dubai Islamic Ins. and Reinsurance Co. (-3.4%).

Over on the ADX, the index fell 0.3% on turnover of AED 883 mn. Meanwhile, Nasdaq Dubai was down 0.3%.