The UAE, represented by the Ministry of Finance as the issuer, and in cooperation with the UAE Central Bank as the issuing and paying agent, announced the results of the first auction for the issuance of Federal Treasury T-Bonds denominated in UAE dirhams, with a standard auction size of 1.5 billion dirhams (about $400 million). ) as part of the Treasury bond issuance program worth 9 billion dirhams for the year 2022.
The launch of the AED 1.5 billion T-Bonds program saw strong demand from the six major distributor banks, with bids worth AED 9.4 billion received, and oversubscription by 6.3 times, according to the Emirates News Agency, WAM.
The demand for dirham bonds was strong across both tranches, distributed over two-year bonds at 750 million dirhams, and 3-year bonds at 750 million dirhams, with a total issuance of 1.5 billion dirhams, as previously announced.
Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, said that the success of launching the first auction is part of enhancing the economic competitiveness of the United Arab Emirates, and supports the sustainability of economic growth, so that the UAE continues to consolidate its position as one of the most competitive and advanced in the world.
He stressed that this success is reflected in the market-driven premium prices, which were achieved with a difference of 28 basis points on US Treasury bonds for two years, and a difference of 29 basis points on US Treasury bonds for three years.
He pointed out that this successful first issuance is a milestone towards building the yield curve denominated in UAE dirhams, and providing safe investment alternatives for investors that contribute to strengthening the local financial market and improving the investment environment.
Sheikh Maktoum bin Mohammed has invited international investors to participate in the local T-Bonds issuance programme, which is widely available to all eligible investors, and will soon be followed by a listing on Nasdaq Dubai to promote secondary market trading along with primary distributors.
For his part, Sheikh Mansour bin Zayed Al Nahyan, Deputy Prime Minister, Minister of Presidential Affairs and Chairman of the Central Bank of the UAE, said that the success of the first auction of federal treasury bonds, and the demand that exceeded 6 times the volume of subscription, is an achievement that reflects confidence in the success of the economic and financial policies in the country. It also reflects the UAE’s position as an attractive environment for investments, its strong creditworthiness, and its economic and competitive capabilities at the global level.
He added that we are confident that the success of the first issuance of federal treasury bonds constitutes a new stage that contributes to enhancing the strong performance of the financial sector in the country and creating safe and advanced investment alternatives denominated in UAE dirhams for investors, leading to achieving the objectives of the new monetary framework for the dirham.
He expressed his thanks and appreciation to all the contributing partners, especially the Ministry of Finance, in achieving this success, stressing the importance of integrating efforts and promoting innovative initiatives that contribute to the development of the sector and support the state’s vision and future plans.
The Standardized Pricing Federal Treasury Bond Program (Dutch Auction) has been developed for the final acceptance of bids and final allocation amounts, regardless of the lowest priced bids received, to ensure complete transparency in accordance with international best practices in bond structuring.
The lowest bid for the 2-year bond tranche was at 2.88% with a weighted average bid of 2.96%, the interest rate for the uniformly priced final coupons held at 3.01% while the lowest bid for the 3-year bond was at 2.95%, with a weighted average bid of 3.09 % and the interest rate for the uniformly priced final coupons fixed at 3.24%.
The first auction will be followed by a set of subsequent periodic auctions, in line with the proposed 2022 issuance plan. Government Treasury T-Bonds denominated in local currency and the dirham are building a local currency bond market, developing the yield curve in the medium term. These bonds include tranches of varying durations between two and three years, and five years initially, and a ten-year tranche will be issued at a later time.
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