GCC bond and sukuk issuance falls 17% as borrowing costs rise in Q3

09/11/2026 04:18 AST

Bond and sukuk issuance across the GCC countries fell 17.5% in the third quarter of 2026 as higher global interest rates and renewed regional tensions weighed on borrowing activity, according to a report by Kamco Invest.

GCC issuers raised $42.5bn through bonds and sukuk during the July-September 2026 period, down from $51.6bn in the previous quarter and 19.4% lower than the corresponding period last year.

Saudi Arabia was the largest GCC issuer during the third quarter, raising $15.7bn, entirely through sukuk. The UAE followed with $12bn, while Kuwait raised $8.7bn. Qatar's issuance stood at $4.7bn, compared with $1bn for Bahrain and $300mn for Oman.

Corporate borrowing accounted for most of the decline, with issuance falling 25% quarter-on-quarter to $23.4bn. Government issuance declined 6% to $19bn.

Despite the quarterly slowdown, the regional fixed income market remained on a growth trajectory, with total issuance reaching $160bn during the first nine months of 2026, an increase of 3.3% year-on-year.

As per the report, the increase in global interest rates was a key factor behind the slowdown in Gulf debt markets, with benchmark yields rising sharply during the third quarter.

The yield on the 10-year US Treasury increased by 53.6 basis points in September to end the month at 5.287%, while the US Federal Reserve delivered its first interest rate increase since 2023.

GCC issuers faced additional uncertainty from renewed fighting in the Middle East, which coincided with the traditional summer slowdown in debt market activity. Issuance in the region fell to $7.3bn in August, from $18.5bn in July, before recovering to $16.7bn in September.

Higher yields translated into increased borrowing costs for Gulf governments. Kuwait's new 10-year bond carried a coupon of 5.509%, compared with 4.652% on its October 2025 issuance.

Saudi Arabia's 10-year sukuk was priced at 5.60%, against 4.875% on its January issuance.

Despite higher borrowing costs, demand for GCC debt remained strong, with several major sovereign issuances attracting order books significantly larger than the amounts offered, Kamco Invest said.

The GCC US dollar credit spread ended the third quarter at 88 basis points, approximately half the 170 basis points recorded for the emerging market US dollar aggregate index.

Kamco Invest said the decline in regional bond prices was primarily driven by rising interest rates rather than concerns about Gulf credit quality.

Muscat Daily