The UAE’s first dirham-denominated treasury bond was listed on Nasdaq Dubai, after the Dh1.5 billion ($408 million) issuance was oversubscribed by 6.3 times and received bids worth Dh9.4 billion amid strong demand from regional and global investors in the first auction week.
The United Arab Emirates, represented by the Ministry of Finance (MoF) as the issuer, in collaboration with the Central Bank of the UAE (CBUAE) as the issuing and payment agent, has announced the results of the first auction of the dirham-denominated federal Treasury Bonds of the Government of the United Arab Emirates (T-Bonds), with a benchmark auction size of AED 1.5 billion (circa USD400 million), which is part of the AED 9 billion T-Bonds issuance program for 2022.
The launch of the AED 1.5 billion UAE T-Bond program witnessed a strong demand through the six primary bank dealers, with bids received worth AED 9.4 billion, and oversubscription of 6.3 times. With a final allocation of AED 750 million for two years tranche, and AED 750 million for the three years tranche, where the strong demand was across both tranches, with total issuance of AED 1.5 billion as previously announced. State News Agency Wam reported that Mohammad Al Hussaini, Minister of State for Financial Affairs rang the market-opening bell at the exchange to celebrate the listing and circulation of the T-bond issued by the UAE federal government acting through the Ministry of Finance.
Emirates announced the launch of a T-Bonds issuance programme, as part of plans to build a local currency bond market and diversify its financial resources, for 2022 with a benchmark size of Dh1.5bn. Other tranches will be issued with various tenures for up to five years at later dates throughout the year.
H.H. added: “The Federal T- bond issuance constitutes a new phase in promoting the robust performance of the UAE’s financial sector, providing safe and advanced dirham-denominated investment. It will achieve the objectives of the new Dirham Monetary Framework. His Highness expressed his thanks and appreciation to all partners, including the Ministry of Finance, and emphasized the importance of collaboration and innovative initiatives to develop the sector and support the country’s initiatives and plans.
“The national economy will continue its momentum and leadership during the next phase in the context of transitioning to the new economic model within the UAE 50 economic plan, in which the UAE establishes a diversified knowledge-based economy on innovation, entrepreneurship, and advanced industries.”
The Ministry of Finance also announced the second auction of the UAE’s traditional dirham-denominated treasury bonds this month, same was oversubscribed 6.5 times and received bids for Dh9.7 billion ($2.64 billion). The Dh1.5 billion sales were divided into two tranches of two and three-year notes for Dh750 million each.
T-bonds are fixed-rate government debt securities that pay semi-annual interest payments until maturity, online financial encyclopedia Investopedia said. They are also considered to be relatively risk-free.
“The success is reflected in the attractive market-driven prices, which was achieved by a spread of 27 basis points over US Treasuries for two years, and a spread of 25 bps over US Treasuries for three years. The second auction followed the practice of reopening the T-Bonds, which helps in building up the size of individual bond issues over time and improve liquidity in the secondary market,” it added.
Chief Executive of Nasdaq Dubai, Hamed Ali, “The second bond listing from the UAE federal government underscores the government’s confidence in Nasdaq Dubai’s comprehensive infrastructure … for the issuance and listing of fixed income instruments from sovereign and commercial issuers in the UAE and globally.” The Wam report said the latest T-bond listing increases the value of domestic and international fixed income listings on Nasdaq Dubai to $102bn. The auction will be followed by a series of subsequent periodic auctions, in line with the proposed 2022 issuance plan. The T-Bonds will be denominated in UAE dirham to develop the local bonds debt market and to develop the mid-term yield curve. The Securities will be issued initially in 2/3/5-year tenures, followed by a 10-year bond at a later date.
Six agent banks have been appointed by the Ministry of Finance as primary dealers for participants in the market auction of the T-bonds and to actively develop the secondary market. They include Abu Dhabi Commercial Bank, Emirates NBD, First Abu Dhabi Bank, HSBC, Mashreq Bank, and Standard Chartered.
