UAE raises $300m from dual-tranche treasury bond sale

The issuance had strong investor demand, with bids reaching Dh5.51 billion

Dh500 banknotes. The UAE Central Bank acted as issuing agent for the dual-tranche Treasury bond transaction. Pawan Singh / The National

The UAE has completed its second conventional dirham-denominated treasury bond issuance this year as the Arab world’s second-largest economy continues to diversify its funding base.

The Emirates raised Dh1.1 billion ($300 million) from the sale of the T-bonds in a deal that was five times oversubscribed, the Ministry of Finance said on Tuesday.

The dual-tranche deal received strong investor demand through six primary dealers. The two and three-year tranches of Dh550 million each received bids worth Dh5.51 billion.

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

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

“The success is reflected in the attractive market-driven price at the time of the auction; the T-bonds achieved a pricing of 5 to 20 basis points over the applicable US Treasury benchmark with similar maturity,” the Finance Ministry said.

“This auction followed the practice of reopening the T-bonds, which helps in building up the size of individual bond issues over time and improves liquidity in the secondary market.”

In 2022, the Finance Ministry issued T-bonds worth Dh9 billion in total, with two, three and five-year tenors.

The T-bonds programme will contribute to building the UAE dirham-denominated yield curve.

It will also help in “strengthening the local debt capital market, developing the investment environment, providing safe investment alternatives for investors, as well as supporting sustainable economic growth”, the ministry said.

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 was denominated in US dollars, included conventional 10-year and 20-year tranches, as well as 40-year dual-listed Formosa bonds, the ministry said at the time.