UAE's first auction of treasury bonds in 2023 oversubscribed 6.2 times

The government issued T-bonds aggregating to $2.45 billion last year

The latest auction received strong demand through the six primary bank dealers, the government said. Andrew Parsons / The National

The first auction of the UAE's conventional dirham-denominated treasury bonds for the year was oversubscribed by 6.2 times, receiving bids worth Dh6.85 billion ($1.86 billion), the Ministry of Finance said on Monday.

The move comes as part of the government's T-bonds programme for this year, it said in a statement.

T-bonds are fixed-rate government debt securities that pay semi-annual interest payments until maturity, according to online financial encyclopaedia Investopedia. They are also considered to be relatively risk-free.

The UAE announced the launch of a T-bonds issuance programme last year as part of plans to build a local currency bond market and diversify its financial resources.

In 2022, it issued T-bonds aggregating to Dh9 billion across tenors of two, three and five years through six auctions.

In the T-bonds auction, the UAE government is represented by the Ministry of Finance as the issuer, in collaboration with the UAE Central Bank as the issuing and payment agent.

The latest auction received strong demand through the six primary bank dealers, the statement said.

The "strong demand" was across both tranches, with a final allocation of Dh550 million for the two-year tranche and Dh550 million for the five-year tranche, with a total of Dh1.1 billion.

"The success is reflected in the attractive market driven price, which was achieved by a spread of a 10 basis points (bps) for the two-year tranche, and a spread of 15 bps over for the five-year tranche – both over the applicable US Treasury benchmark," the statement said.

Reopening the T-bonds helps in building up the size of individual bond issues and improves liquidity in the secondary market, the government said.

The T-bonds programme contributes to "building the UAE-dirham-denominated yield curve, strengthening the local debt capital market, developing the investment environment, providing safe investment alternatives for investors, as well as supporting sustainable economic growth", it added.

In 2021, the UAE raised $4 billion through the issuance of multi-tranche sovereign bonds, the first time it issued bonds at the federal level.

The bond package, which is denominated in US dollars, included conventional medium and long-term 10 and 20-year tranches, as well as 40-year dual-listed Formosa bonds, the ministry said at the time.