Bond Deals of the Year: Emerging markets — Best bonds of a big bunch

Abu Dhabi shattered an emerging markets record when it printed a dual tranche bond in October, its only visit to the international market in 2025. The 10-year chunk landed at just 18bp over US Treasuries, the tightest from an EM sovereign at that tenor.

Its three-year bond was also not far off a record. At 10bp over Treasuries, it was the third tightest in EM sovereign history.

Those tight spreads did not deter investors; books closed at $15bn combined. Abu Dhabi put the EM sovereign market into new territory at the 10-year tenor. It was not just a tight deal by EM standards but by any measure in the dollar market, and it was priced well inside where some gold standard US investment grade companies have sold 10-year debt this year.

The trade was a testament to the strength of Abu Dhabi as a bond issuer. It is barely EM these days, and its credit ratings of A2/AA/AA are better than many of the world’s largest and most developed sovereigns.

Binghatti’s sukuk might seem unremarkable at first glance. The book was hefty at five times the issue size, but that was not unique in the sukuk market. Tightening from initial pricing was also in the same realm as other high yield Gulf corporates.

But what made Binghatti’s trade stand out was that it came a few months after the company had seen the price of its only sukuk at the time crash 10 points in a single day. At the time the company threatened legal action against anyone “spreading misinformation” about the company or its management.

It would take a long time for some EM corporates to recover from such a wobble and regain market access. But Binghatti recovered fast and so well that when it returned to the market in July, investors were very keen to buy new debt.

Books hit $2.5bn and Binghatti could have issued more. More than half the new sukuk went to investors outside of the Gulf too — an impressive result.

This was the year of the subordinated trade in the Middle East, with volumes rocketing by more than 170% versus 2024.

This led to some investor fatigue, particularly for Saudi Arabian banks. FAB was the last Gulf bank to come to the market with subordinated debt in 2025, but there was little sign of buyer tiredness when it did.

FAB tightened 62.5bp from initial price talk, more than any other Gulf additional tier one issuer this year. This was more impressive given it also offered the lowest yield of any of those AT1s by 25bp.

A banker away from the mandate thought a yield of less than 6% would be impressive, ahead of pricing. FAB came 12.5bp through that.

So strong was demand that FAB priced far inside where similarly dated AT1s from some major European banks were trading — testament not just to the strength of the issuer but also of the Gulf banking sector.

The primary market for capital trades was on fire for much of the year and it spread to Uzbekistan in October, when state-owned Uzbek Industrial & Commercial Bank (SQB) landed the country’s first AT1.

This was new territory for all involved and the issuer had to tread carefully. There were no obvious comparables given that no central Asian bank had printed an AT1 before, and during roadshows US president Donald Trump rattled markets with threats to impose more tariffs on China.

SQB waited for markets to calm before opening books; and the decision paid off. Demand was high, peaking at more than four times the deal size.

Uzbek issuers first appeared in the international markets in 2019 and it has taken six years for a bank to come with a capital trade.

A theme of the Gulf primary market in 2025 was some of its highest quality issuers’ return to euros. One of those was the Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia.

Unlike the others its euro dual trancher was a debut in the currency. The deal achieved the twin aims of investor diversification and arbitrage versus dollars.

It secured the latter in some style. The longer tranche came 1bp-2bp inside where a dollar bond might have been priced, but at the shorter end, PIF priced its bond up to 15bp cheaper than it could have priced in dollars.

It also bagged some of its tightest ever spreads relative to the Saudi sovereign, at 8bp and 10bp for the three and seven-year bonds respectively. These are spreads to the Kingdom that it had secured in the sukuk market but not in bonds — until October.

PIF added new investors to its funding pool, something particularly important for large Saudi issuers.

Qatar ended a 13 year absence from the Islamic primary market with a 10-year sukuk that nearly broke the record for the tightest 10 year from an EM sovereign set by Abu Dhabi two months earlier — although it is perhaps a stretch to call Qatar an emerging market given it has left JP Morgan’s emerging market sovereign bond index.

The Qatar deal landed at 20bp over US Treasuries, making it the tightest 10-year sovereign sukuk in history.

Nonetheless, the sukuk drew peak orders of more than $10bn and books closed at nearly three times the deal size.

Driving that demand were local Islamic investors who have not had any Qatar sovereign sukuk to buy since 2023, when its last sukuk matured. Qatar was also of interest to dedicated investment grade accounts, who picked up yields of nearly 4.5% for 10-year paper from a sovereign so cash-heavy that it does not really need to issue.

Qatar probably could have printed tighter given the demand, but it showed restraint and did not fight for every basis point, avoiding the risk of high-quality investors quitting the book.

It is not every day an emerging market sovereign comes to the primary market a few days after the US president threatens military intervention in the country, but Nigeria did just that in November.

Investors brushed off Donald Trump’s threats, piling $12.4bn of orders into Nigeria’s dual trancher, the biggest order book for an African sovereign issuer since before 2022.

Nigeria also went long and in doing so became the only EM sovereign issuer to price 20-year paper all year, with only one other going longer.

Investors have not seen such duration from a sub-Saharan African sovereign since many lost market access in 2022 when interest rates and US Treasury yields surged.

Also notable was how little difference there was in the yields of the two tranches. The curve was just 50bp — effectively the same as the US Treasury curve, a remarkable outcome for a sovereign like Nigeria.

It was an impressive trade for a country that, while it has been on a reform drive welcomed by overseas investors, is still one of the lowest rated of the sub-Saharan African sovereign issuers at B3/B-/B.

Slovenia printed a landmark sustainability-linked bond (SLB) in June, the first from a European sovereign on international markets and just the third globally.

Investors lapped it up with the book finishing at €6bn. In January, when printing a conventional euro bond, Slovenia drew orders of €2.1bn for a sale of the same size.

Slovenia made a public commitment, via the bond market, to reduce its carbon emissions and it will accept the consequences if it does not via a higher coupon — but will also reap the financial benefit if it hits its targets.

SLBs, particularly at the sovereign level, are a nascent product and have not enjoyed the same uptake as green bonds.

More sovereigns are working on SLBs, including some with much larger economies with far greater environmental footprints than Slovenia. The hope is that Slovenia has injected momentum into a market that has yet to really take off.

The bond sealed Slovenia’s status as one of the world’s most forward-looking and innovative sovereign bond issuers.