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UAE's First Auction of Federal Treasury Bonds Achieves Bids Worth $400 Million

UAE's First Auction of Federal Treasury Bonds Achieves Bids Worth $400 Million

Thursday, 12 May, 2022 - 06:15
The UAE seeks government treasury bonds denominated in dirhams to build a local currency bond market (Reuters)

The first auction of the dirham denominated UAE Treasury Bonds (T-Bonds), with a benchmark auction size of AED1.5 billion ($400 million), drew bids worth AED9.4 billion ($2.5 billion), an oversubscription of 6.3 times.

The auction by the UAE, 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, is part of the AED9 billion ($2.4 billion) T-Bonds issuance program for 2022.

The launch of the AED1.5 billion ($400 million) UAE T-Bond program witnessed a strong demand through the six primary bank dealers across both tranches, with a final allocation of AED750 million for the two-year tranche, and AED750 million for the three-year tranche, with a total issuance of AED1.5 billion ($400 million) as previously announced.

Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, said the success of the first auction is part of strengthening the UAE’s economic competitiveness and supporting the sustainability of economic growth.

He stressed that this success is reflected in the attractive market driven prices which achieved a spread of 28 bps over US Treasuries for two years, and a spread of 29 bps over the US Treasuries for 3 years.

“This successful first issuance is a milestone towards building a dirham denominated yield curve and providing safe investment alternatives for investors which contributes to strengthening the local financial market and developing the investment environment,” Sheikh Maktoum said.

The minister also invited international investors to participate in the T-bonds issuance program which is widely open for all eligible investors, and will soon be followed by a listing on Nasdaq Dubai to promote secondary market trading along with primary dealers.

“The success of the first auction of the Federal T- bonds and the strong demand for them, which witnessed an oversubscription by 6.3 times, is a milestone.

This reflects confidence in the UAE’s economic and financial policies and its future development plans. It also reflects the UAE's position as an attractive hub for investment, its strong creditworthiness and economic and competitive capabilities at the global level,” Sheikh Mansour bin Zayed Al Nahyan, Deputy Prime Minister, Minister of Presidential Affairs and Chairman of the Board of Directors of the Central Bank of the UAE, said.

“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,” he added.

The T-Bonds program was developed in uniform pricing (the Dutch Auction) for final bid acceptance of bids and final allocation amounts, regardless of the lower-priced bids received to ensure full transparency in accordance with global best practices for bond structuring.

The lowest bid for the two-year tenor was at 2.88 percent, with the weighted average bids at 2.96 percent and the final uniform coupon rate fixed at 3.01 percent.

The lowest bid for the 3-year tenor was at 2.95 percent, with the weighted average bids at 3.09 percent and final uniform coupon rate fixed at 3.24 percent.

The auction will be followed by a series of subsequent periodic auctions, in line with the proposed 2022 issuance plan.

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