GCC debt markets have rallied since the ceasefire, but tight liquidity remains a key hurdle  | Fortune

GCC bond and sukuk markets have experienced a distinct “relief rally” since the signing of the Iran-U.S. ceasefire on April 8, steadily recovering from their sharp sell-offs in the weeks following the outbreak of the conflict at the end of February

Many GCC US dollar sukuk (Islamic bond) and bond yields had widened to five-year high spreads by the end of March—the highest levels since the pandemic—but have narrowed significantly toward pre-war levels over the past few months.

“GCC fixed-income yields are benefiting from a decline in geopolitical risk premiums,” the Fitch Ratings said in a report published in mid-June.

The credit rating agency noted how the spread on the S&P GCC Bond Index—the most utilized benchmark for the region—has fallen to 89 basis points, from 126 basis points in March, and roughly 100 basis points before the war.

GCC sukuk, meanwhile, continue to have lower yields than GCC bonds, on average, due to broader demand from Islamic banks, although spreads on high-yield GCC sukuk remain heightened.