MENA Swells With Sovereign Debt Deals as Yield Hunt Intensifies

The Middle East and North Africa are experiencing a wave of sovereign bond issuance as governments tap global debt markets to meet financing needs, even though oil prices have held in the mid-$60s per barrel and credit spreads remain compressed.

Kuwait re-entered the international capital markets after an eight-year hiatus, successfully issuing $11.25 billion in three, five and ten-year bonds at spreads of 0.40 to 0.50 percentage points over US Treasuries. The offering drew order books exceeding $28 billion and allocated more than two-thirds to investors outside the region. The government pushed through a new public debt law in March that raised its borrowing ceiling and cleared the path for external issuance.

Egypt has also moved to mandate banks to issue dollar-denominated sovereign debt. It launched a bond offering worth $1.5 billion after receiving bids above $8.9 billion, and plans multiple issuances—including Islamic sukuk—to bridge its mounting external financing gap. The government has said it will leverage state banks to manage and distribute these issues, signalling a more central role for domestic institutions in its debt strategy.

Across the Gulf, sovereigns have been aggressively raising debt: Saudi Arabia, Abu Dhabi and Bahrain are among the major issuers in 2025. Gulf states have sold over $27 billion in international bonds and sukuk this month alone. Abu Dhabi placed $2 billion of 10-year bonds at just 0.18 percentage points over Treasuries—the tightest spread ever recorded for a sovereign from an emerging market at that maturity. Bahrain tapped markets too, despite having the highest debt-to-GDP ratio in the Gulf, issuing longer-dated debt at spreads around 2.5 percentage points.

Investors remain undeterred by oil’s softness. Rather than retreating, demand has intensified, driven in part by global portfolios seeking yield in a low-rate world. The compression in credit spreads reflects confidence in sovereign balance sheets and the appeal of high-grade Gulf credits. Even so, analysts warn that persistent borrowing could strain future funding flexibility, particularly in nations with weaker fundamentals or less diversified economies.

A number of structural and geopolitical factors underpin this issuance boom. Many Gulf states still enjoy ample fiscal reserves and low debt burdens, positioning them to raise funding cheaply. Their high sovereign ratings support tight spreads on bond deals. For Egypt, the push into dollar markets and reliance on domestic banks reflect a fragile external position and urgent currency pressures. The country’s deficit remains elevated, and debt servicing demands keep squeezing its foreign reserves.