This year was to have seen the debut of a number of major bond issues in the region. But debt issuers in the major capital markets of Beirut and Cairo have appeared nervous about tapping foreign buyers, as the appetite for local paper falls victim to global worries about emerging markets.

The Lebanese government is carefully studying market conditions before it goes ahead with a $500 million Eurobond issue due for completion by the end of September. The issue is the second phase in a $2,000 million package lead managed by Merrill Lynch, part of the government's aim of replacing expensive domestic debt with cheaper foreign equivalent.

Finance Minister Fuad Siniora announced on 25 August that any decision on a go-ahead for the issue would have to wait a few weeks for a stronger market environment to emerge.

The decision follows Egypt's move earlier this year not to proceed with its inaugural $250 million Eurobond sale, blaming unfavourable market conditions. But Economy Minister Youssef Boutros Ghali, echoing Lebanon's Siniora, has signalled his government's intention of going ahead with the debt issue as soon as international market sentiment allows.

A senior source close to the Lebanese bond issue warns against drawing too many conclusions from these two markets' experiences. 'There is no lack of confidence in Lebanese debt in terms of price and yield. What is remarkable about Lebanon is how safe it is from the volatile market environment. Spreads from Eurobonds have barely budged over the last few weeks,' the source said.

Observers say recent Lebanese reluctance to brave the international market owes more to a desire not to be perceived to be insensitive to global portfolios. 'Because of its relative price stability, Lebanon has a higher chance of successfully executing bond issues than other issuers who are experiencing higher volatility in their spreads,' the source said.

In Egypt's case, the fact that it has never issued before weighed heavily against it. Undertaking an inaugural Eurobond issue amid the present choppy international waters would have been much less advisable, observers argue.

The country is likely to have to wait for a more amenable climate for emerging market debt to emerge next year. However, Beirut's relative imperviousness to prevailing conditions should see it completing further bond issues before the year end.