Down from last year’s high
Less issuance from governments
Dollar dominantes foreign-currency issuance
New debt issuance in the GCC fell by more than a fifth in the first five months of the year, led by a decline in Saudi sovereign sales, London Stock Exchange Group (LSEG) data shows.
Corporate sales of both conventional bonds and sharia-compliant bonds known as sukuk took up some of the slack.
In total, Gulf bond and sukuk sales in both foreign and local currencies in the five months to May 31 fell 22 percent to $87.5 billion, compared with almost $113 billion in the same period last year, according to the LSEG.
“There has been a clear shift in issuer composition,” says Jinan Al Taitoon, a senior research specialist at the LSEG.
“While sovereigns – particularly Saudi Arabia’s government – dominated issuance last year, their activity has slowed considerably in 2025.”
In contrast, corporate sales are up 52 percent year on year, and account for 42 percent of total new Gulf debt. Banks accounted for more than half of these corporate sales.
“This uptick [in bank bonds] is largely driven by liquidity pressures stemming from declining oil revenues and reduced deposit growth, prompting banks to access capital markets more actively,” says Al Taitoon.
In terms of foreign currency debt, the regional five-month total was up 9 percent at $72.4 billion.
Within this total, bond sales rose 11 percent to $42.3 billion and sukuk sales 6 percent to $30 billion.
Dollar-denominated sales accounted for 92 percent of new foreign currency debt; the remainder was in several currencies including Chinese yuan, euros and British pounds.
“Demand for investment grade Gulf sovereign debt is strong, not only from local investors but Asian investors also,” says Nadim Amatouri, director of credit research at Dubai’s Arqaam Capital.
“From an investor perspective, Saudi Arabia sovereign debt seems rather cheap – so, attractive – while Oman and Bahrain look expensive; Bahrain because of the deterioration in government finances together with expectations of high supply risk,” Amatouri says.
Bahrain is most indebted of the six members of the GCC, equivalent to around 130 percent of GDP.
Meanwhile, Gulf local currency debt sales from January to May plunged almost 70 percent year on year to $15 billion.
New sukuk sales dropped 69 percent to $12.8 billion. Conventional bonds sales fell 58 percent to $2.3 billion.
This decline “reflects a normalisation in issuance volumes following the extraordinary activity the previous year”, says Al Taitoon.
“Sukuk played a major role in driving GCC debt issuance in 2024, with volumes reaching exceptionally high levels due to large liability management programmes and refinancing activity.”
In a liability management programme, a country seeks to rebalance its debt to lower financing costs, extend maturities and reduce refinancing risks.
Overall, in the first five months of 2025 the percentage split between conventional bonds and sukuk for all debt denominations was 51-49 in bonds’ favour. In the corresponding period of 2024, sukuk claimed a 61 percent share and bonds 39 percent.
May revival
Dollar-denominated emerging market debt is usually priced at a spread over US Treasury yields, often using the 10-year Treasury as a benchmark.
This yield is 4.46 percent, up 0.2 percentage points since the end of March, which indicates selling pressure on US treasuries; bond prices and yields are inversely correlated.
“Gulf bond and sukuk issuance briefly slowed in April as issuers held off due to unfavourable market conditions amid volatility in US 10-year Treasury yields,” says Al Taitoon.
US President Donald Trump’s imposition of sweeping tariffs in early April roiled equity and debt markets worldwide. Gulf debt issuance activity rebounded in May.
“This suggests the April dip was driven more by market timing and sentiment than by a fundamental shift in pricing conditions,” says Al Taitoon.
