The UAE central bank’s five-year treasury bond (T-Bond) issue was oversubscribed 5.7 times to attract bids to the tune of AED8.6 billion.
As many as six primary bank dealers participated in the latest bid – the fourth auction round of the total AED9 billion T-bond issue plan for this year.
The overwhelming response to the latest bond issue is attributed to the attractive market driven prices – a spread of 8 basis points (bps) over US Treasuries for two years, and a spread of 20 bps over US Treasuries for five years.
Mohamed Hadi Al Hussaini, Minister of State for Financial Affairs, said the new five-year T-Bonds would contribute to strengthening the local debt capital market, besides building the UAE dirham-denominated yield curve.
“Establishing an active market for trading the T-Bonds also contributes to raising the efficiency of pricing and capital allocation and supports the development of the broader capital market.
“It also provides safer alternatives for foreign investors to invest in local currency,” Al Hussaini said.
The T-Bonds programme supports the UAE government’s efforts to cover future financing requirements.
These bonds are issued also as part of the government plan to diversify funding sources and reduce dependence on foreign capital markets, in line with the transition to the new economic model.
Khaled Mohamed Balama, Governor of the Central Bank of UAE, said the issuance of 5-year T-Bonds in the national currency reflected the robustness and stability of the country’s financial system and the confidence of local and international investors, thus enhancing UAE’s position as a global financial hub.
“We are pleased with the positive outcome of our partnership with the Ministry of Finance (MoF) in developing the financial market and improving the country’s investment environment,” Balama said.
The UAE central bank issued in May 2022 the dirham-denominated T-Bonds in two and three year tenures.
Six agent banks have been appointed by the MoF as primary dealers for participants in the primary market auction of the T-Bonds and to actively develop the secondary market.
These banks are Abu Dhabi Commercial Bank (ADCB), Emirates NBD (ENBD), First Abu Dhabi Bank (FAB), HSBC, Mashreq Bank and Standard Chartered.
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