UAE Bonds To Exit JPMorgan Emerging Market Indices in Four-Step Phase-Out from March 2026

UAE Bonds Exit JPMorgan Emerging Market Indices in Four-Step Phase-Out from March 2026

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UAE bonds upgrading from JPMorgan EM Bond Indices in four-step phase-out starting March 31, 2026.

JPMorgan will remove UAE sovereign bonds from its EMBI Global Diversified index in four equal steps between 31 March and 30 June 2026.
The UAE has exceeded JPMorgan's GNI per capita and purchasing-power-parity thresholds for three consecutive years, triggering the reclassification.
UAE sovereign debt carries an AA-range credit rating, placing it outside the typical emerging-market sovereign risk profile.
The UAE currently holds approximately 4.1% of the EMBI Global Diversified index, creating meaningful forced selling pressure during the phase-out.
After June 2026, EM bond ETFs will no longer provide UAE sovereign exposure - advisers will need to source this via GCC or global aggregate funds.
Kuwait and Qatar have already undergone the same reclassification, reflecting a broader trend of wealthy Gulf states exiting EM bond benchmarks.

EMBI Global Diversified: Why UAE Sovereign Debt No Longer Fits the Emerging Market Profile

The UAE's removal from JPMorgan's EMBI Global Diversified - the world's most widely tracked hard-currency sovereign bond benchmark - marks a significant milestone in the country's financial evolution. UAE sovereign debt now carries an AA-range credit rating and the country's GDP per capita reached nearly USD 54,000 in 2024, placing its fixed-income profile far closer to developed-market peers than to traditional emerging-market borrowers.

This hard-currency bond index phase-out follows JPMorgan's application of its GNI per capita threshold and purchasing-power-parity criteria, which the UAE has exceeded for three consecutive years. For GCC fixed-income benchmarks and the broader regional bond market, the decision signals a structural shift in how global index providers classify Gulf sovereign debt - one with direct implications for fund managers, advisers and institutional investors holding UAE bonds.

Four Equal Steps to Full Removal by June 2026

JPMorgan's Global Index Research team confirmed that the UAE will exit the EMBI Global Diversified and related hard-currency sovereign and quasi-sovereign indices in four equal weight reductions. The process begins on 31 March 2026 and will be complete by 30 June 2026. The phased structure is designed to reduce forced selling by passive managers and limit price volatility in UAE sovereign bonds during the transition.

Following the announcement, any new UAE sovereign or sovereign-linked issues will no longer be eligible for index inclusion. Existing constituents will have their target weights mechanically cut at each quarterly rebalancing date until the weighting reaches zero. The euro-denominated EM bond grouping, where the UAE carries a smaller 1% weight, moves faster: the UAE will be fully excluded from that index in a single step at the end of March 2026.

Why the UAE No Longer Qualifies as an Emerging Market

JPMorgan cited the UAE's sustained high-income status as the core rationale for reclassification. The country has met GNI per capita (gross national income per person) and purchasing-power-parity thresholds for three consecutive years, placing it well outside the income range JPMorgan uses to define emerging-market sovereigns. Bloomberg data reported UAE GDP per capita at nearly USD 54,000 in 2024, reinforcing the country's position among the world's high-income economies.

UAE sovereign debt is rated in the AA range by the major credit rating agencies - a profile more consistent with investment-grade developed-market borrowers than typical EM issuers. Dubai-based analysts quoted in The National News described the adjustment as recognition that UAE bonds are "no longer representative of classic EM risk" and should instead be compared to other high-income, investment-grade sovereign issuers.

The move follows similar decisions for Kuwait and Qatar, both removed from JPMorgan EM bond indices after exceeding the same wealth thresholds. Taken together, these exits reflect a broader trend in which the wealthier Gulf states are being reclassified as higher-income credits across global fixed-income benchmarks, as reported by Al-Monitor in its coverage of earlier Gulf reclassifications.

Market Impact - Forced Selling and Spread Pressure

According to Bloomberg's summary of the index announcement, the UAE currently represents approximately 4.1% of the EMBI Global Diversified universe. That is a meaningful weight for passive strategies and benchmark-aware active managers, both of whom face a requirement to reduce UAE holdings across the four-step phase-out. In the euro-denominated EM grouping, funds focused on that index must liquidate UAE positions by the 31 March cut-off.

Trading desk commentary cited in Khaleej Times suggests the technical selling pressure could widen UAE spreads relative to AA-rated developed-market peers in the near term. This is a flow-driven effect rather than a credit signal - the reclassification reflects stronger fundamentals, not weaker ones. JPMorgan's phased approach specifically aims to avoid the sudden forced selling and excessive price volatility that a single hard exit would create.

Analysts expect some capital to rotate from UAE bonds into remaining EM names, with potential beneficiaries including higher-yielding Latin American or African sovereigns as index funds rebalance. Dedicated GCC or MENA bond mandates, and global aggregate strategies, may absorb part of the selling from investors who continue to view UAE credit as a high-quality diversifier with strong fiscal backing.

What This Means for Advisers and Portfolio Managers

After June 2026, EM bond ETFs (exchange-traded funds) and index funds tracking the EMBI family will no longer provide any UAE sovereign exposure. Advisers currently using these instruments in client portfolios will need to source UAE bond allocations through GCC, MENA or global aggregate funds, or via direct purchases of UAE sovereign or quasi-sovereign paper. Multi-asset portfolios using global bond ETFs may also see subtle changes in yield, duration and risk characteristics as UAE paper exits the underlying indices.

For clients holding UAE bonds directly or via discretionary mandates, advisers can frame the index exit constructively: it is a consequence of higher income and improved credit fundamentals, not any deterioration in quality. Over time, the reclassification may broaden UAE's investor base to include developed-market and global aggregate managers seeking high-grade Gulf exposure. Clients heavily positioned in EM bond funds should be aware that managers may rotate into higher-beta (more volatile) sovereigns to replace the UAE's relatively stable AA-rated paper, which could marginally increase overall portfolio volatility.

UAE Domestic Debt Market Development

The reclassification coincides with ongoing efforts to deepen the UAE's local bond and sukuk market. The Ministry of Finance's retail sukuk programme - offering Sharia-compliant treasury sukuk backed by the federal government's AA-range credit rating - has attracted multiple-times oversubscription at recent auctions, with yields in the mid-3% range. Secondary market listings on Nasdaq Dubai support liquidity for both institutional and retail investors.

As global EM funds reduce their UAE holdings, domestic and regional investors, along with dedicated GCC bond strategies, are expected to play a larger role in absorbing demand for UAE sovereign paper. This structural shift aligns with the UAE's broader agenda to build a more dynamic, accessible domestic debt market - one that can stand alongside international hard-currency issuance as the country's credit profile continues to evolve.

What Clients are Asking their Advisors

What does it mean for UAE bonds to be removed from JPMorgan's emerging market index?

JPMorgan's EMBI Global Diversified is the world's most widely tracked benchmark for hard-currency sovereign bonds from developing economies. Removal means UAE sovereign debt no longer qualifies under JPMorgan's income and wealth criteria - a reflection of the country's AA-range credit rating and high per-capita GDP, not any deterioration in creditworthiness.

What should investors in EM bond funds do now UAE is leaving JPMorgan's EM index?

Investors holding EM bond ETFs or funds that track the EMBI Global Diversified will automatically lose UAE sovereign exposure after June 2026. To maintain an allocation to UAE bonds, they will need to switch to GCC, MENA or global aggregate bond funds, or purchase UAE sovereign and quasi-sovereign issues directly.

How does the UAE's index exit compare to Kuwait and Qatar's earlier EM bond reclassifications?

Kuwait and Qatar were removed from JPMorgan's EM bond indices after exceeding the same GNI per capita and purchasing-power-parity thresholds. The UAE follows the same path, continuing a trend in which the wealthier Gulf states are graduating out of the emerging-market category across global fixed-income benchmarks.

Could UAE bond prices fall as a result of being removed from JPMorgan's EM index?

There is a short-term risk of spread widening as passive EM funds are required to sell down UAE positions in four quarterly steps between March and June 2026. Analysts describe this as a technical flow effect rather than a credit concern, and expect dedicated GCC and global aggregate investors to absorb much of the selling pressure.