Emerging market governments have accelerated their issuance of foreign currency bonds to a record level in 2026, despite rising global interest rates and renewed strength in the US dollar. This trend comes amid ongoing geopolitical tensions related to the conflict involving Iran, with some countries borrowing to address the financial impacts of the crisis.

So far this year, sovereign issuances from emerging markets have reached approximately $200 billion, including a recent surge of $10 billion that marked the return of Saudi Arabia and Qatar to the public dollar bond markets since the beginning of the Iran conflict. Other nations, such as Turkey, Kazakhstan, and the Dominican Republic, are also preparing to issue dollar and euro bonds in the near term. According to data from the Institute of International Finance (IIF), this year’s bond sales have already exceeded the $160 billion recorded over the same period in 2025, with total issuance hitting $190 billion by the end of August.

Analysts attribute this sustained borrowing appetite in part to improved investor perceptions of emerging markets. Jonathan Fortun, a senior economist at the IIF, noted that the asset class is increasingly seen as safer than in previous years, pointing out that the trend is not a temporary effect but reflects ongoing investor confidence.

Even as yields on 10-year US Treasuries have climbed to around 5 percent—raising the cost of borrowing globally—emerging market bonds have maintained relatively stable yield premiums over US debt. The benchmark JPMorgan index spread currently stands at approximately 2.2 percentage points, down from about 2.6 points a year ago. This suggests that despite expectations of further US Federal Reserve interest rate hikes, demand for emerging market debt remains resilient.

Investors have also cited steady global economic growth, despite elevated oil prices linked to the Iran conflict, as a factor supporting emerging market bond demand. Countries heavily engaged in global trade, including Egypt, have demonstrated economic resilience, which has encouraged allocations to emerging market assets. Yvette Babb, a portfolio manager at William Blair Investment Management, noted that inflows to emerging market debt have persisted even in recent weeks.

A significant portion of this year’s issuance—about one-third—is denominated in euros, an increase from a quarter last year, reflecting efforts by sovereign issuers to diversify currency exposure and seek lower borrowing costs. Additionally, issuance in Chinese renminbi has reached record levels for the year.

Among notable recent transactions, Qatar sold $3 billion in five-year and ten-year bonds at yields of 5.3 percent to 5.5 percent. This was the emirate’s first public debt sale since a private placement earlier this year amid heightened fiscal pressures tied to a steep increase in its budget deficit. The deficit rise is linked to a sharp drop in liquefied natural gas revenues after the near closure of the Strait of Hormuz, a vital export route affected by the broader regional conflict. Abdeslam Alaoui of Deutsche Bank highlighted that Qatar’s successful bond sale underscores the depth of liquidity available for reputable issuers, despite geopolitical risks.

Saudi Arabia also completed a sale of just over $3 billion in sukuk, a form of Islamic debt, earlier this month. Meanwhile, Pakistan raised $3 billion through its largest-ever dollar bond issuance, with yields ranging from 7 to 8 percent. These proceeds boosted Pakistan’s foreign reserves to above $20 billion, supporting energy import needs and reinforcing its improved credit ratings.

Despite concerns in developed markets that the surge in borrowing by large technology companies focused on artificial intelligence could crowd out other issuers, analysts from Bank of America suggest that the impact on emerging market debt issuance remains limited. The scale of AI-related borrowing is unprecedented but has not significantly constrained capital availability for sovereign borrowers in emerging economies so far.