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The GCC bond market witnessed a flurry of activity this week, with borrowers seizing the opportunity to leverage favourable financial conditions that have resulted in exceptionally tight borrowing costs.
The market saw a total of nine mandates across sovereigns, banks and corporates, with most showing a preference towards subordinated US dollar instruments.
Qatar led the debt rally on the sovereign side, securing tight pricing on its dual-tranche offering comprising a $1 billion three-year senior unsecured bond and a $3 billion 10-year sukuk, with coupons at 3.625% and 4.25%, respectively.
Jordan also returned to international debt markets in its first outing since April 2023, with a $700 million seven-year benchmark Eurobond at a 5.75% coupon.
Lower interest rates and overall favourable market conditions have served as the key drivers behind the recent debt market rally.
“Demand is also at its highest for the GCC, especially from real money accounts in Asia, Europe, and the US, and a lot of issuers want to capitalise on this,” Nour Safa, Managing Director, Head of MENA Debt Capital Markets at HSBC, told Zawya.
Capital bonds, sukuk
This week’s rally saw a total of five GCC banks tap debt markets, including a lender backed by Saudi’s sovereign wealth fund, the Public Investment Fund.
On Wednesday, Gulf International Bank – Saudi Arabia priced its debut $500 million perpetual non-call 5.5-year AT1 bond at par with a 6.625% coupon.
The kingdom’s Alinma Bank was the second Saudi lender issuing debt this week with a $500 million Tier 2 USD sukuk priced at 5.792%.
The UAE’s Sharjah Islamic Bank also issued a $500 million five-year sukuk at 4.60%, which was tightened to T+95bps from initial price thoughts in T+125bps area.
Kuwait and Qatari lenders also flocked to issue debt with the National Bank of Kuwait coming out with a no-grow $300 million 10.25-year non-call 5.25-year Tier 2 subordinated bond following strong investor demand.
On Friday, Qatar International Islamic Bank (QIIB) tightened the price on its $500 million five-year senior unsecured benchmark sukuk to UST +85 from initial price thoughts in the T+125bps area.
In its report, Fitch forecast a “strong” issuance outlook for GCC banks in 2026, based on more than “$10 billion of maturities, continued financing needs and lower interest rates.”
“About $1.8 billion of AT1 instruments will reach first call dates in 2026, and we expect these to be called due to favourable market conditions, including lower interest rates,” the ratings agency said.
Corporate debt
Corporate bond spreads have leaned towards tightness in recent weeks according to analysts. Safa noted that an issuer could come to the bond market, which she referred to as very liquid, with competitive pricing, and raise 10-year money easily. “It is probably priced better than your five-year loan, depending on who the issuer is,” she added.
AviLease, the Saudi-based aircraft leasing company owned by PIF, priced its $850 million five-year Eurobond on Thursday at a spread of US Treasuries + 110bps.
Abu Dhabi-based alternative investment group Ittihad International Investment LLC also leveraged demand for GCC debt, pricing its $550 million five-year sukuk at par with a 7.375% coupon on Thursday.
Waiting in the wings is the Saudi-based Arabian Centres Company (Cenomi Centres), which issued a mandate earlier this week for a senior unsecured Reg S six-year sukuk, denominated in Saudi Arabian riyals.
The sukuk mandate from the Tadawul-listed company, which develops and operates contemporary lifestyle centres in Saudi Arabia, comes with a coupon rate of 8.5% per annum, payable quarterly.
The outlook for 2026 remains strong, with one UAE banker forecasting higher volumes next year. “I think we also have a lot of maturities that have been forthcoming since the Covid era. As these redemptions come to market, you would expect people to refinance them in the bond market as well.”
(Reporting by Bindu Rai, editing by Seban Scaria)
