Central & Eastern Europe Strategic Funding Outlook

Global Banking & Markets: CEE Strategic Funding Outlook

12th January, 2026, Vienna

Global Banking & Markets welcomed senior issuers, banks, central banks and investors from across Central & Eastern Europe for an in-depth discussion on the strategic funding outlook for the year ahead. The conversation reflected a market entering 2026 with momentum, improving technicals and a more discerning investor base, creating favourable funding conditions.

Macro Backdrop & Asset Allocation

Investors highlighted 2025 as a strong year for returns, particularly across local-currency debt, hard-currency sovereigns and corporate credit in CEE and wider emerging markets. This performance is now feeding directly into renewed capital inflows, reinforcing a familiar dynamic: strong returns attract institutional capital with a lag of 6–12 months; therefore, participants expect a strong 2026 and more RFPs from asset allocators for emerging market debt.

The second half of 2025 marked a notable shift, with consistent inflows into emerging markets for only the second time in recent history. This sets a constructive tone for 2026, particularly as global asset allocators remain materially underweight EM versus the past decade, leaving significant scope for re-allocation. Appetite remains strongest for USD and EUR exposure, with competition intensifying over which regions, sectors and issuers ultimately capture these flows.

Spreads, Credit Quality & Market Structure

While headline spreads appear tight on historical comparisons, participants agreed that the structure of the market has fundamentally changed. Lower-quality credits have largely exited benchmark indices, while fallen angels such as Brazil, South Africa and Turkey have already repriced. Russia’s removal from indices has further reshaped the investable universe.

What remains is a smaller, higher-quality, better-levered universe, which participants argued justifies tighter spreads and reflects structural resilience rather than overvaluation.  Spreads are predicted to remain tight going into 2026.

Supply, Technicals & Issuance Dynamics

Issuance volumes in 2025 were significant, with approximately USD 470bn of corporate issuance and USD 240bn of hard-currency sovereign supply. However, net supply remained negative, as maturities and calls exceeded new issuance, creating powerful technical support and sustained downward pressure on spreads.

Corporate credit markets in particular have experienced very high demand, forcing investors to adjust to a new pricing reality.

Relative Value: EM vs Developed Markets

Relative value discussions reinforced the contrast between EM and developed markets. US and European investment-grade markets offer limited upside, alongside large and persistent issuance pipelines driven by fiscal deficits, infrastructure spending, energy investment and data-centre financing.

By comparison, CEE and EM markets benefit from cleaner technicals, more favourable net supply dynamics and stronger marginal demand, underpinning the relative value case.

Primary Market Execution & Investor Behaviour

Recent transactions highlighted evolving execution dynamics. Early-year issuance windows attracted large global accounts, even during traditionally illiquid periods. While curves initially struggled to perform, strong demand enabled final pricing inside guidance, signalling a new equilibrium rather than short-term exuberance.

Issuers and banks were described as measured, prioritising high-quality investor participation over marginal spread compression. Strong secondary liquidity has supported price discovery and reinforced confidence in new benchmark issuance.

Sovereign Strategy, Fiscal Discipline & Political Risk

Sovereign issuers emphasised front-loading funding amid heightened geopolitical uncertainty. Common themes included dual-tranche issuance strategies, stable demand for green and sustainable bonds, and a reduced appetite for very long-dated maturities as investors reassess duration risk.

Several issuers noted improved fiscal discipline, allowing for lower funding needs than in prior years, while political cycles and elections continue to influence timing decisions.

Currency Choice & Funding Diversification

Currency selection remained a key focus. USD markets continue to offer depth and liquidity, particularly for BBB- and high-yield credits, while EUR markets remain highly attractive for high-grade CEE issuers, given strong demand. Downgrade and index-exclusion risks were discussed but generally viewed as low probability in the near term.

Issuers also highlighted FX diversification objectives, using euro issuance to manage debt metrics, reduce reliance on domestic markets and support private-sector development. Alternative formats, including Samurai bonds, were cited as opportunistic diversifiers with attractive pricing dynamics.

Corporates, Banks & Private Credit

Corporate supply remains constrained, particularly in high yield, supporting spreads. Key drivers include infrastructure and energy investment, state-backed projects and refinancing linked to capital-structure optimisation.

Banks noted growing use of PPPs, ECAs and bilateral structures, alongside rising competition from private credit. While private credit is increasingly active in mid-market and high-yield segments, public markets continue to dominate liquidity, transparency and scale. No meaningful demand for Islamic finance was observed in CEE, with activity concentrated instead in Central Asia and Turkey.

Risks & Forward Outlook

The prevailing tone was cautiously optimistic. Key risks include geopolitical escalation and prolonged market exclusion for certain sovereigns. Ukraine’s return to markets was framed as a medium-term story, dependent on stabilisation and post-restructuring conditions.

ESG, Innovation & Market Development

Sustainable finance remains a core pillar, though investors are increasingly focused on structure, credibility and liquidity over labels. More niche instruments were viewed as tactical rather than strategic at present. Financial institutions are also exploring securitisation and SRT structures to manage balance-sheet risk.