CEEMEA bond market readies to go still further after record year

It has been a record-breaking year for the CEEMEA primary market in 2025. There were $286.2bn-equivalent of public, benchmark sized bonds in dollars or euros this year as of November 11, according to GlobalCapital’s Primary Market Monitor, comfortably ahead of the $260.5bn in all of 2024.

Fuelling this has been the expectation of US Federal Reserve interest rate cuts — they started late in 2024 and resumed in September — coupled with inflows returning to emerging market bond funds, which have enjoyed stellar returns. Spreads have been at near-record tights for much of 2025, enticing issuers to market. It has been a goldilocks scenario for investors and issuers alike.

Yet CEEMEA bond bankers think things are about to get even better. Adding to those influential factors in 2026 will be a hefty number of redemptions, as five-year bonds issued during the Covid-19 pandemic come up for refinancing.

Of the respondents to GlobalCapital’s survey of CEEMEA bond bankers, 70% expect volumes to rise next year, with just two thinking they will fall.

Khaled Darwish, head of CEEMEA debt capital markets at HSBC in Dubai says: “2026 looks set to witness a healthy continuation of what has happened in 2025. I expect an environment of a reduction in rates and healthy market liquidity, and hopefully a reduction in geopolitical tensions — especially if we’re talking the Middle East, where we have seen a lot of geopolitical volatility, but it has not really affected the market per se. Are we going to have another 30%-40% leap in volumes? Unlikely, but I see double digit growth.”

Driving some of the optimism about issuance in 2026 are those Covid-19 redemptions. “What is interesting for me is that the majority of bonds issued in 2021, the previous high-water mark for issuance, were in the five-year tenor, which points to a promising 2026 just based on that alone,” says Blazej Dankowski, co-head of CEEMEA debt capital markets at Citi in London.

The majority of respondents expect volumes to rise in the three constituent CEEMEA regions next year. In the Middle East, only 36% do not see a rise in issuance coming, while in central and eastern Europe 57% predict growth.

“We’ve seen a lot of new issuers this year, particularly in the Gulf Cooperation Council (GCC) and Commonwealth of Independent States, and we expect more debutants,” says Ritesh Agarwal, head of debt capital markets at Emirates NBD in Dubai. “The market will be busy, and rates are on a downward trajectory. This will give impetus to issuers to tap capital markets.”

The pace of issuance is “not sustainable”, adds another head of debt capital markets in the Middle East, but the slowdown may not be near yet.

“The question is for how long will it last?” says Hassan Orooj, head of debt capital markets and syndicate at Mashreqbank in Dubai. “It still has legs, we think. Redemptions next year warrant a very high rate of issuance. A lot of issuers have come this year, but we expect activity to remain strong into 2026.”

In Africa, the optimism for growth in issuance is even higher: 71% of respondents predict higher issuance in 2026.

“Africa can be split into buckets, one being repeat issuers with good access that come nearly every year,” says Victor Mourad, co-head of CEEMEA debt capital markets at Citi in Dubai. “With a better rates environment, they can do more. There are some elections to consider, but I’d expect all of them to have access next year.”

The next bucket is those that face higher pricing to access the market, Mourad adds, and their issuance “will be opportunistic and depending on funding needs especially in local currency”.

Market access has been wide open in 2025, at least for some part of the year if not all, as demonstrated by the 25% year-on-year increase in African issuance volume. An almost equal split of CEEMEA bankers, roughly 40% each, think market access will remain the same or will open up for more borrowers.

“There will be windows when some lose access,” says Agarwal. “We’ve seen it with African sovereigns. Some have come late this year, like Angola and Nigeria, that did not have access earlier in the year.”

Markets in 2025 have been open to “almost the widest possible group”, adds Orooj, who says market access will, as usual, open and close through the year, which can be a challenge for DCM houses but perhaps not for issuers.

“The issuers that have market access problems have learned to diversify into other sources,” says Orooj. “And in DCM, we’re competing with development finance institutions and other options for borrowers. They know DCM opens and shuts, so they’ve become less reliant on it.”

With interest rate cuts in the US — those already delivered and those expected — driving issuance this year and expectations for more in 2026, there is the question of whether some borrowers might wait until after those rate cuts before issuing, capitalising on lower base rates.

But bankers were unanimous in forecasts for frontloading in 2026: no survey respondents thought issuers would hang around.

“Nobody is waiting for rates to drop before they issue,” says Darwish. “If you need funding, you go and get it and de-risk, and I expect a lot of frontloading in the first quarter 2026.”

Part of the desire to get funding done as soon as possible is related to spreads, which have been near historic tights for much of 2025. The majority of bankers, 57%, expect EM spreads to widen in 2026, with just three predicting they will tighten.

Orooj does not rule out tighter spreads, saying “they have been tighter before, not by much, but often markets overshoot”. For Darwish, spreads in 2026 can stay level to 2025 or even a bit tighter if US Treasuries and rates “move at a benign pace”.

“But if those moves accelerate or we see heightened geopolitical volatility or a moderate move in oil prices, I can see EM indices going slightly higher in a measured fashion,” he says. “I don’t expect a significant change either way, but a dramatic increase in political risk or a big shift in oil prices would push down credit ratings.”

Lower rates may also alter the average maturity of new issuance in 2026. Of this year’s CEEMEA benchmarks, excluding perpetuals, which tend to be callable, 30% had a tenor of 10 years or longer, according to the PMM data as of December 2. Only three CEEMEA issuers, Hungary and Saudi Aramco in dollars and Slovenia in euros, have issued 30-year bonds, and nothing has come beyond that.

One reason is the steep yield curve in the US, says Dankowski, with 100bp between the yields on the five and 30-year US Treasuries. This is “a bit off-putting” for issuers, according to a senior market source.

Most survey respondents, 64%, expect the average maturity of issuance to lengthen in 2026.

“We should see more 30-year issuance from EM investment grade names as rates come down,” says Darwish. “And there are issuers in CEEMEA, such as the CEE sovereigns, that have big volumes to do, and they’ll look to stretch duration longer.”

Mourad agrees and expects “plenty more” GCC 30-year bonds in 2026. Orooj and Kumar at Mashreq also see maturities getting longer as rates go lower.

“Issuers can’t keep borrowing at the five and 10-year tenors, they’ll have to diversify and accept the new rate environment and issue a 30 year in a different postcode to 2020,” says Orooj, referring to the near zero interest rate world of the pandemic.

Dankowski sounds a more cautious note and adds that the market is not pricing in much change to the steep US yield curve, which has discouraged CEEMEA issuers from printing long duration deals this year. Agarwal also thinks “the bulk” of GCC issuance will still fall in the five to 10-year range.

One notable area of growth in 2025 has been sukuk, which made up 23% of CEEMEA issuance in 2025 versus 16% in 2024.

This is despite the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) mulling new guidelines for sukuk that could radically alter the nature of the instruments — even making them more akin to securitizations than regular securities.

“Sukuk volumes are significantly higher this year with several new clients accessing this product given strong liquidity and demand dynamics,” says Agarwal. “I don’t think volumes will dip next year and if there are any changes from a regulatory perspective, the market will find solutions.”

In CEEMEA, sukuk are a product largely confined to the Middle East, but bankers expect issuers from outside of the region to begin using the market. An example came from Turkey this year, where Turk Telekom printed the first corporate sukuk from the country on the international markets.

“We’re seeing a higher share of sukuk and in the last few years it has gone higher despite more stringent regulations, such as the AAOIFI standards, particularly in the UAE,” says Charan Kumar, a director on Mashreq’s debt capital markets desk in Dubai. “Despite this, we see great appetite for sukuk. Central Asia is a growing market for sukuk, and governments are considering legislation, which could be approved in 2026. It will start with sovereigns and trickle down to banks.”

That does not mean it is easy to convince issuers to print sukuk. Agarwal cautions that with markets so strong it is easier for conventional bond issuers to keep doing those rather than branch out into sukuk, which take time to structure and prepare.

“But we keep pushing,” he says. “Look at Turk Telekom. They did a sukuk and bond and saved money with the sukuk and also now have access to a new pool of investors.”

While sukuk’s proportion is growing that of environmental, social and governance (ESG)-labelled issuance is falling, by 13% year on year as of November 11. It made up 12% of CEEMEA issuance this year versus 15% in 2024.

No respondents to the survey think ESG is going to become more of a priority for EM investment funds or CEEMEA issuers in 2026, and a majority think it will become less of one. That does not mean it is going to disappear, agree bankers, with Orooj saying “ESG has its place and it’s not going anywhere”.

“For some issuers, ESG may not be as strategically important compared to two to three years ago,” adds Darwish. “But it has become a mainstream segment of the CEEMEA market. There are some very interesting ESG projects coming and we don’t see ESG issuance supply into the market diminishing.”

This year’s rip-roaring primary market raises the question of whether investment banks will add DCM headcount, particularly as it is just a couple of years since the primary market dried up in 2022 and 2023, which led to thinner staffing.

Orooj says there is some caution going into 2026 due to hiring already done and “uncertainty in the world”, while Agarwal says banks are hiring “at all levels” having started it in a busy 2024.

“We didn’t know whether those volumes were sustainable,” he says. “Now we have had two big years and expect this trend to continue, banks are hiring at all levels. For GCC regional banks, we’ll see more juniors entering and there’s a general dearth of junior people in the Middle East.”

This year’s record issuance might suggest all is rosy in the capital markets and the world. But anyone working in EM debt knows how quickly things can sour and there are plenty of potential threats to issuance next year.

The one raised most often in the survey is US-China relations, followed by US interest rate volatility and the risk of a US recession.

Darwish says that four months ago he would have said geopolitics was the biggest risk, but the temperature “has lowered”. Now, he says higher US interest rate volatility is the greatest risk and that an eye needs to be kept on oil prices, to which GCC liquidity and the sukuk market are particularly sensitive.

Orooj says we are yet to see the effect of tariffs on inflation and that if there is “a real impact on inflation, it’s going to impact benchmark rates”.

But for Dankowski, the main threats will be idiosyncratic, although he notes there is always the possibility of unforeseen events impacting primary.

“I do not see many obvious risks,” he says. “The credit cycle in EM is healthy, rates are coming down and supply and demand dynamics are healthy. But in our world, there is always something that can crop up, and one thing I’d keep an eye on is oil prices, which can have a significant important on EM economies whether importing or exporting.”