International investors have long viewed Gulf fixed income as a formidable primary market with little secondary market depth. The region issues at enormous scale, but much of that paper has traditionally disappeared into buy-to-hold portfolios and rarely re-emerges. Easy to get in, harder to get out. It's a reputation that has shaped how investors sized their positions in the region. But it’s also, increasingly, out of date.
Total outstanding GCC debt has passed $1.5 trillion across more than 290 issuers, and last year annual issuance hit a record $452 billion. Yet many investors still assume the underlying secondary markets have not kept pace with this surge in issuance, and that credit desks in the region have not yet made the electronic execution jump that equity markets have experienced. But the people trading that debt on the ground say otherwise.
The buy-side has stopped complaining
“Liquidity is not a constraint,“ says Mohieddine (Dino) Kronfol, chief investment officer of global sukuk and MENA fixed income at Franklin Templeton, which has run a dedicated GCC debt franchise from Dubai for well over a decade. “Clients can enter and exit at far larger scale today than even a few years ago.“ Secondary liquidity has been “improving consistently, supported by significantly larger GCC issuance, index inclusion into EMBI and GBI, and various structural reform initiatives across the GCC.”
The market's behaviour under stress provides another test of how far it has developed. During a year defined by the joint U.S. and Israel attack on Iran, which began in February, GCC investment grade spreads widened just 8 basis points year-to-date at the index level, and prices reflected the fundamentals.
“Markets have increasingly discriminated between the companies and economies most exposed” to the ongoing disruption of the Strait of Hormuz,” says Michael Leithead, head of fixed income at EFG Asset Management. Saudi credit has proved resilient, while Hormuz-dependent and leveraged names have been penalised. In a panicked, illiquid market, investors sell off everything. But in this one, they have distinguished between credits rather than selling the region, which is one sign of evolution.
Electronification is underway
“Adoption of electronic trading in GCC fixed income continues to grow,“ says Andrew Beacham, global head of emerging market trading product at Bloomberg.
GCC secondary turnover on Bloomberg's electronic markets platform nearly doubled from $22 billion in 2022 to $40 billion in 2025, against issuance growth from $246 billion to $452 billion over the same period. Average electronic trade size rose from roughly $500,000 to $900,000, and around 150 dealers priced GCC fixed income electronically in 2026, up from 120 in 2022. The figures cover trading on Bloomberg’s platform rather than the entire secondary market, but they show a substantial increase in electronic activity.
The most persistent version of the illiquidity story attaches to sukuk: structurally complex, therefore structurally untradable. But even here, that is no longer the case. “Both trade and settle identically,” Kronfol says of sukuk versus conventional paper from the same issuers. Where sukuk liquidity is tighter, the cause is “excess structural demand,” a shortage of sellers, not a failure of plumbing. Sukuk is, in fact, the fastest-electronifying corner of the market: turnover on Bloomberg's platform nearly quadrupled from $3 billion in 2022 to $11.5 billion in 2025, and the pricing gap to conventional bonds (the difference between the winning quote and the next best) has closed to three cents.
Catching up, not caught up
None of this means Gulf fixed income has caught up with the most liquid bond markets. Franklin Templeton's desk still executes “a combination of electronic and voice, heavily skewed to voice.” Kronfol argues that the gap reflects the limitations of EM debt trading rather than something particular to the region. “Electronic trading in fixed income is dominated by rates and IG credit,” Kronfol points out. “HY and EM are catching up, but the penetration is arguably five to 10 years behind, at 20 to 25 percent versus 50 to 60 percent.” The next leg of growth is already visible in workflow, though. “Our trading desks are starting to execute more of our flows, which is probably the most significant precursor to further electronic adoption.“
The greatest liquidity challenge remains local currency, which accounts for only around 16 percent of outstanding regional debt. “We are encouraged by the rapid increase in issuance volume,” Kronfol says, but “liquidity in that segment is still far too low.” Fixing it will require a concerted effort, with debt management offices playing a central role, supported by regulated exchanges, central banks, capital market authorities, industry lobbies and institutional investors.
The gap that remains
Middle East equity desks have rebuilt themselves to accommodate electronic execution, and the market noticed various efforts regarding the electronification of gulf trading desks. The bond market has actually made a quieter version of that same journey. The market is bigger, deeper, and increasingly electronic. The real gap in Gulf credit is no longer between the region and its liquid-market peers. It's between the market and its reputation.
