GCC debt markets have rallied since the ceasefire, but tight liquidity remains a key hurdle
GCC bond and sukuk markets have experienced a distinct “relief rally” since the signing of the Iran-U.S. ceasefire on April 8, steadily recovering from their sharp sell-offs in the weeks following the outbreak of the conflict at the end of February Many GCC US dollar sukuk (Islamic bond) and bond yields had widened to five-year high spreads by the end of March—the highest levels since the pandemic—but have narrowed significantly toward pre-war levels over the past few months. “GCC fixed-income yields are benefiting from a decline in geopolitical risk premiums,” the Fitch Ratings said in a report published in mid-June. The credit rating agency noted how the spread on the S&P GCC Bond Index—the most utilized benchmark for the region—has fallen to 89 basis points, from 126 basis points in March, and roughly 100 basis points before the war. GCC sukuk, meanwhile, continue to have lower yields than GCC bonds, on average, due to broader demand from Islamic banks, although spreads on high-yield GCC sukuk remain heightened. “Since the first ceasefire, and even more so since the signing of the memorandum of understanding, bonds have rallied and yields have come down quite nicely,” Azad Zangana, head of GCC macroeconomic analysis at Oxford Economics in Dubai, told Fortune. “So, it looks like the worst has passed in terms of risk premiums in the market for now.” In turn, the improvement in the market’s fundamentals is fuelling a revival in issuance. A combined total of $7.5bn in debt was issued by QatarEnergy, AviLease, Emirates NBD, First Abu Dhabi Bank, Dukhan Bank and Burjeel Holdings in the week to 26 June. The strength of demand for Burjeel Holdings’ $500 million sukuk led to it being 3.2 times oversubscribed. It was priced with a 7% profit rate and a yield of 7.125%. This represents the lowest 5-year yield by a GCC-based private non-investment grade corporate issuer since 2020. The $500 million sukuk is due to be listed on the International Securities Market of the