The Ministry of Finance (MoF), in collaboration with the Central Bank of the UAE (CBUAE), has announced the successful completion of its latest auction for Islamic treasury sukuk (T-Sukuk). This auction is part of the fourth quarter 2024 issuance programme and attracted a substantial Dhs7.2 billion in bids, a clear indication of the market’s confidence in the UAE’s Islamic financial instruments.
The auction, which involved the issuance of Dhs1.1 billion worth of T-Sukuk, garnered interest from eight primary dealers, oversubscribing the offering by 6.5 times. The strong demand for the sukuk, denominated in UAE dirhams, underscores the confidence investors have in the country’s financial markets.
Demand Reflects Market Confidence
The two tranches offered in the auction, with maturities set for May 2027 and September 2029, were competitively priced, signaling strong investor appetite. The yield to maturity (YTM) for the May 2027 tranche was set at 4.10%, while the September 2029 tranche was priced with a YTM of 4.12%. These figures were benchmarked with spreads of 10 and 12 basis points, respectively, above US Treasuries of comparable maturities.
The overwhelming response is seen as a positive indicator of the UAE’s growing prominence in Islamic finance. The issuance of Islamic T-Sukuk plays a crucial role in enhancing the local debt market and providing secure investment opportunities for institutional investors.
A Significant Step for UAE’s Financial Markets
The Islamic treasury sukuk issuance programme is a key element of the UAE’s broader strategy to develop a dirham-denominated yield curve, which will contribute to the growth of the local debt capital market. The programme is also aligned with the nation’s commitment to strengthen its Islamic finance ecosystem, providing investors with secure and Sharia-compliant financial instruments.
“The continued success of the T-Sukuk issuance programme highlights our ongoing efforts to enhance the UAE’s financial market infrastructure and provide a reliable platform for secure investments,” the Ministry of Finance stated in a press release. “This auction is further evidence of the strong demand for high-quality, Sharia-compliant assets in the region.”
Strengthening Islamic Finance and Investment Opportunities
The Islamic T-Sukuk programme aims to support the UAE’s Islamic finance sector by offering a reliable source of liquidity for banks and financial institutions. It also seeks to strengthen the local debt capital market by offering government-backed sukuk, which contribute to the development of the local yield curve. As the programme continues, the UAE will remain at the forefront of the region’s Islamic finance industry, offering attractive investment opportunities for both domestic and international investors.
By attracting significant bids, this auction demonstrates the confidence investors have in the stability and growth of the UAE’s financial system. The programme is also expected to provide future opportunities for diversification in the Islamic finance sector.
