The deluge of tightly priced bond issues by Gulf banks in the past six weeks creates an opportunity for banks elsewhere in the emerging markets.
Since the market reopened after the volatility caused by US tariff plans in April, banks in the Gulf Cooperation Council region have been issuing very actively.
Since the start of May, they have raised $18.2bn via 27 trades, according to GlobalCapital's Primary Market Monitor.
A large part of their output — 56%, by volume and number — has been sukuk, which are often very tightly priced, because of captive demand from Islamic funds.
That compares with 47% of volume and 44% of tranches in the first four months.
So tight are the spreads and yields on the sukuk that Sharjah Islamic Bank, for example, put out initial price thoughts for an additional tier one capital deal last week at the same level as international investors saw fair value.
Despite the high issuance, international investors have not been satisfied — they have faced a wall of expensive sukuk. They do buy them, as they count in EM bond indices, but in small tickets.
Investors have been deprived of attractive bank debt, and conventional bond issuers elsewhere in CEEMEA can take advantage of that.
They might find investors a little more eager and a little less price-sensitive than usual.
The vast majority of CEEMEA bank issuers outside the Gulf in CEEMEA are in Turkey and eastern Europe — they have been quiet in the primary market in the last few months, particularly the Turkish banks.
If they venture back to the market in the near future, they might find an investor base happy to consider bonds, such as capital securities, offering a bit more yield or spread than a Gulf AT1 priced nearly 50bp inside fair value.