His Highness Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, First Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, said that the success achieved by the Government Treasury Bonds Programme and the Islamic Treasury Sukuk Programme denominated in dirhams confirms the sound policies related to the investment targets pursued by the UAE, which contributes to strengthening its position as an attractive global destination and incubator for financial investments.
His Highness said: “The UAE is continuing to consolidate its position as one of the most competitive and advanced economies in the world. This success is a reflection of the country’s strong creditworthiness and tremendous economic capabilities, which support the strong performance of the country’s financial sector and contribute to enabling sustainable growth, creating safe and advanced investment alternatives denominated in UAE dirhams for investors, and improving the investment environment in the country.”
His Highness stressed the importance of continuing efforts to launch and support transformational initiatives and projects, which contribute to developing the financial sector in the country and support its future strategic plans, pointing out the importance of strengthening partnership with all parties, achieving effective integration in implementing development and strategic projects, and working on proactive initiatives that ensure readiness for the future, meet the aspirations of the next stage, and contribute to enhancing the comprehensive and sustainable development process witnessed by the UAE.
This came during the Ministry of Finance’s announcement of the results of the government treasury bonds and Islamic treasury sukuk programs, which were launched in 2022.
His Highness confirmed in a post on the “X” platform yesterday that “this success confirms the firm confidence in the UAE’s investment environment, reflects the strength of our financial performance, and the ability to provide safe and advanced investment alternatives. Today, it confirms the UAE’s position as an attractive global destination for financial investments, topping global economic indicators.”
His Highness added: “With the vision of our wise leadership and ambitious financial policies, there is no limit to what we can achieve to keep the UAE at the forefront of nations.”
The Ministry of Finance announced that the government treasury bonds programme and the dirham-denominated Islamic treasury sukuk programme have enabled us to achieve exceptional successes. Since their launch until the end of last August, they have witnessed the issuance of treasury bonds worth AED 11.2 billion and Islamic treasury sukuks worth AED 13.8 billion, for a total of AED 25 billion. This reflects the high confidence enjoyed by the investment environment in the UAE as one of the most competitive and advanced economies in the world, and confirms the keenness of the Ministry of Finance to develop and grow federal resources efficiently with the aim of diversifying sources of income in a way that ensures maintaining the high standards of the financial system of the UAE.
The ministry indicated that it paid the value of two-year treasury bonds totaling AED 4.85 billion in May 2024, bringing the total outstanding bonds to AED 6.35 billion. Thus, the total outstanding domestic public debt for the government treasury bond and Islamic treasury bond programmes amounted to AED 20.15 billion, until the end of last August.
The UAE has been assigned a sovereign credit rating of AA- with a stable outlook by Fitch Ratings, and an “Aa2” credit rating, the strongest sovereign rating in the region with a stable outlook, by Moody’s.
During 2022, the Treasury Bonds Program was launched in cooperation with the Central Bank of the United Arab Emirates as the issuing and paying agent, to issue government treasury bonds (T-Bonds) denominated in the local currency (AED). These bonds are settled through a local platform, “Bloomberg Auction System”, in accordance with international standards, and are operated by Euroclear Bank.
The banks entrusted with managing the subscription process, which are represented by six major banks in the UAE, including Emirates NBD, Abu Dhabi Commercial Bank, First Abu Dhabi Bank, Mashreq Bank, HSBC Bank, and Standard Chartered Bank, have also been appointed as primary distributors for the issuance of treasury bonds.
Bonds worth AED 9 billion were issued under the programme for 2022, divided into six auctions until the end of the year, with AED 1.5 billion in each auction. In 2023, two additional auctions worth AED 2.2 billion were launched, bringing the total issued under the treasury bond programme to AED 11.2 billion.
On May 11, the ministry paid the value of two-year treasury bonds totaling AED 4.85 billion, bringing the total outstanding bonds to AED 6.35 billion.
The first auction generated very high demand with bids worth AED 9.4 billion received and the offering was oversubscribed by 6.3 times. The success was reflected in the attractive market driven prices achieved at a spread of 28 basis points over two-year US Treasuries and a spread of 29 basis points over three-year US Treasuries.
The second auction of the Treasury Bonds Programme witnessed strong demand from the six primary distributor banks, with bids worth AED 9.7 billion received and the order book was oversubscribed by 6.5 times. The success was reflected in the attractive market-driven pricing achieved at a spread of 27 basis points over two-year US Treasuries and a spread of 25 basis points over three-year US Treasuries.
The third auction of the Treasury Bonds Programme witnessed strong demand, with bids worth AED 7.6 billion received and the subscription volume exceeded by 5.1 times. The success was reflected in the attractive market-driven prices achieved at a spread of 16 basis points over two-year US Treasuries and a spread of 15 basis points over three-year US Treasuries.
The first five-year Treasury bonds were launched at the fourth auction in September 2022, with bids totalling AED 8.60 billion received across the two tranches (two-year and five-year), and the offering was oversubscribed by 5.7 times. The success is reflected in the attractive market-driven pricing achieved at a spread of eight basis points over two-year US Treasuries and 20 basis points over five-year US Treasuries.
The fifth auction also witnessed strong demand, with bids worth AED 7.57 billion received for the two- and three-year tranches, oversubscribed by five times, and at attractive prices achieved at a spread of 8-17 basis points over similar-term US Treasury bonds.
In the sixth auction, bids worth AED 6.72 billion were received for the three- and five-year tranches, with the subscription volume exceeding 4.5 times, and at attractive prices achieved at a spread of 18-30 basis points over US Treasury bonds for similar terms.
In the first auction of 2023, bonds totaling AED 1.1 billion were issued, divided into two tranches for two and five years, with bids worth AED 6.85 billion received, exceeding the subscription volume by 6.2 times, and at attractive prices achieved by a difference of 10-15 basis points over US Treasury bonds for similar terms. The second auction of 2023 was also successful, with bids worth AED 5.51 billion received, exceeding the subscription volume by five times, and at attractive prices by a difference of 5-20 basis points over US Treasury bonds for similar terms.
Following the success of the Government Treasury Bonds Program denominated in Dirhams, the UAE Government, represented by the Ministry of Finance as the issuing entity, and in cooperation with the Central Bank of the UAE as the issuing and paying agent, announced the launch of the Islamic Treasury Sukuk Program denominated in Dirhams. The distinguished practices and international standards used in the Treasury Bonds Program were applied, and the same main distributors that were appointed for the Treasury Bonds Program were appointed, in addition to the addition of two other banks, namely Abu Dhabi Islamic Bank and Dubai Islamic Bank.
The UAE government, represented by the Ministry of Finance, has launched five auctions for the Islamic Treasury Sukuk Program during 2023, with the size of each auction amounting to AED 1.1 billion, with a total value of AED 5.5 billion.
These auctions witnessed an increase in demand from the banks entrusted with managing the subscription process.
This year, until August 31, the Ministry launched six additional auctions under the Islamic Treasury Sukuk Programme totalling AED 8.3 billion, bringing the total outstanding under the Islamic Treasury Sukuk Programme to AED 13.8 billion, and the total outstanding domestic public debt for the Government Treasury Bonds and Islamic Treasury Sukuk Programmes to AED 20.15 billion.
The first auction witnessed bids worth AED 8.3 billion, exceeding the subscription volume by 7.6 times, and by a difference of three basis points over US Treasury bonds, indicating the great interest of local investors in Islamic Treasury bonds in local markets.
The second auction also witnessed positive results, as the value of bids amounted to approximately AED 6.9 billion, which exceeded the subscription volume by 6.2 times, and by a difference of four basis points over US Treasury bonds.
In the third auction, the size of the bids was estimated at about six billion dirhams, exceeding the subscription size by 5.5 times, and by a difference of 2 basis points over US Treasury bonds.
During the fourth auction, the value of bids was equal to six billion dirhams, exceeding the subscription size by 5.5 times, and by a difference of 4 to 13 basis points over US Treasury bonds.
In the fifth and final auction of 2023, the value of bids was estimated at about 5.8 billion dirhams, exceeding the subscription size by 5.2 times, and by a difference of 4 to 11 basis points over US Treasury bonds.
The results of the auctions during the current year show an increase in the demand of the primary markets for Islamic treasury bonds, and a growth in the bond auctions from the primary distributors, as the sixth auction in January received bids worth AED 9.3 billion (an exceptional tranche worth AED 2.8 billion was issued for a period of five years), and the subscription volume exceeded 3.3 times.
In the seventh auction in February, the value of bids amounted to AED 7.6 billion, exceeding the subscription size by 6.9 times. At the end of the first quarter of this year, the eighth auction in March witnessed bids worth AED 7.8 billion, exceeding the subscription size by 7.1 times.
The success of the programme continued to be evident in the 9th auction in May, where bids worth AED 9.81 billion were received, oversubscribed 8.9 times; the 10th auction in July, where bids worth AED 6.76 billion were received, oversubscribed 6.1 times; and the 11th auction in August, where bids worth AED 6.32 billion were received, oversubscribed 5.7 times. The auctions also saw exceptional results, with market-driven premiums achieved at a premium yield to maturity, at a cost of minus 5 to 14 basis points over comparable US Treasury bonds.
Government Treasury Bonds (T-Bonds) and Islamic Treasury Sukuk (T-Sukuk) denominated in local currency (dirham) are building a local currency bond market and developing the medium-term yield curve as a whole.
These bonds and sukuk include tranches with durations ranging from two to three years, and five years, with longer-term bonds and sukuk being issued.
Issuing these bonds and sukuk in local currency contributes to diversifying funding sources, revitalizing the local financial and banking sector, in addition to providing safe investment alternatives for local and foreign investors in local currency, and enhancing the state’s ability to cover future funding requirements in local currency, thus strengthening the local financial market, and improving the investment environment in general.
• With the vision of our wise leadership and ambitious financial policies, there is no limit to what we can achieve to keep the UAE at the forefront of nations.
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