Reuters reported that Bahrain’s $1.5b bond sale, last week, is a bad sign that Gulf borrowers will have to pay a lot more to issue debt in coming months because of low oil prices and less enthusiastic investors.

The last time Bahrain sold a sovereign bond was in September 2014, a 30-year deal that generated an order book of around $6b. The country did not even need to pay a substantial premium to the secondary-market yields of their previously issued bonds, a privilege enjoyed by other Gulf issuers at the time.

This time round, however, Bahrain priced five-year bonds at 5.875% and a 10-year tranche at 7.000%. This would imply that the country will have to pay a new-issue premium of about 70 basis points to ensure a successful sale of debt. The order book this time was only $2.4b.

According to Trade Arabia, similar problems afflict other Gulf Arab countries as Saudi Arabian CDS have also surged.

The UAE, Qatar and Kuwait so far have not followed suit but many expect that they will. Saudi Arabia is preparing to issue bonds overseas and Kuwait has said openly it may do so.

Gulf governments issue bonds to fund budget deficits caused by cheap oil and the debt burden is rising rapidly. Gulf banks are also facing tighter liquidity, creating worries for the situation in 2016 if oil prices remain low.