Citi Sees Momentum in GCC Debt Markets After August Lull

An interest rate drop and healthy GCC liquidity in the coming quarters are expected to trigger transactions across regional sovereigns, banks and corporates

August 25, 2025

The GCC debt capital market is getting ready for another wave of new issuances following an uninterrupted flow of transactions in the first half of the year and a marked lull in the first three weeks of August.

“We had a phenomenal first half. The pipeline in the second half could be smaller, unless a drop in rates sparks a pre-funding strategy toward year-end, pulling transactions planned for early 2026 into November,” Victor Mourad, Co-Head of CEEMEA Debt Financing at Citi, told Zawya.

“The August lull comes down to two factors: heavy volumes in the first half and a natural lag as issuers prepare for the Q3 window, which will kick off from this week onwards,” he added.

While the August supply has fully tapered off in the Middle East, the supply in Europe and Asia has not stopped, and the USIG has seen a record month.

The last major issuance was UAE developer Binghatti’s $500 million 5-year Senior Unsecured sukuk, in early August, but Saudi Arabia remained the GCC region’s top issuer of bonds and sukuk in the first half of 2025, despite debt issuances falling 20% year-on-year (YoY). Saudi companies raised $47.93 billion through 71 issuances in the first six months of 2025, down from $59.73 billion in H1 2024, according to a Kuwait Financial Centre (Markaz) report.

The UAE secured the second spot with $24.03 billion raised through 69 issuances, an increase of 22.2% from H1 2024. Qatar followed, with $10 billion raised from 58 issuances. Bahrain recorded $5.62 billion, while Kuwait saw a 48% increase in issuance value, reaching $3.39 billion. Oman had the lowest total, raising $1.08 billion from six issuances.

Outlook: Saudi, UAE to lead

“The region will continue to see big demand from global and regional investors. The GCC was the first market to re-open the primary emerging market supply after the tariff volatility in April, a testament to its credit strengths,” Mourad said, referring to Mashreq’s acceleration of its $500 million no-grow five-year sukuk, the first issuance from the CEEMEA region since Donald Trump’s tariffs announcement on April 2.

While an interest rate drop and healthy GCC liquidity in the coming quarters are expected to trigger transactions across regional sovereigns, banks and corporates, Mourad expects Saudi Arabia and the UAE to continue to drive regional volumes. The market will trail on most of the big trends in the first half of the year, including supply in AT1 and Tier 2 issuances, and the focus will be on shorter tenors than longer ones. “Why issue an expensive thirty year when you can do something shorter and refinance it in three years at a lower rate?” he noted.

A bevy of bank issuances, especially in Saudi Arabia, stood out during H1. “Saudi banks that had never issued bank capital in the past tapped the market in the first half for debut AT1 and Tier 2 transactions. We also had a few AT1s that were refinanced in the UAE and Kuwait ahead of their call dates. These factors have made the region the largest issuer of US dollar bank capital in emerging markets so far this year. We expect this trend to continue as there are additional call dates in 2026,” Mourad told Zawya.

Corporate issuances surged by 67.7% YoY to $60.20 billion during the first six months of the year. Government-related corporations raised $11.2 billion through 11 deals, up 1.8% YoY. Sovereign debt issuance across the GCC dropped by 48.2%, totalling $31.85 billion. Conventional issuances rose 7.8% YoY to $51.61 billion in the first half, while sukuk sales declined by 18.2% YoY to $40.43 billion.

As an indication that debut issuers continue to see strong appetite from investors, Mourad pointed to the “highly successful transaction” of Saudi mining company Ma’aden, which raised $1.25 billion in its debut sukuk issuance in February, drawing strong investor interest from US, European, Asian and Middle Eastern investors.

Lower-rated issuers, especially in the real estate sector, were also able to lock in attractive term funding. Strong fundamentals in the regional property market have driven robust investor appetite for these transactions.

Supply side trends

Citi has priced 41 tranches in MENA so far this year; the largest include running books for the Saudi, Qatari and Egyptian governments’ international bonds as well as Saudi Aramco’s US dollar bond issuance in May, where $5 billion was raised through a triple-tranche offering.

Mourad expects the supply side to remain even across corporates, sovereigns, and banks in the coming months, especially among repeat issuers and some limited debut names. According to him, investors remain keen to see more private sector companies in the region tapping the market to differentiate the credit profile from the GRE-dominated issuer list.

As the demand for US dollar bonds and sukuk from the region soars, investment bankers are also navigating the shifting market dynamics. “For us, the key is marketing record-tight spreads. We have been able to do that so far this year. With levels now even tighter, transactions will have to be positioned on a relative-value basis against other tighter regions and markets,” he said.

(Reporting by Seban Scaria; Editing by Daniel Luiz)

(seban.scaria@lseg.com)