Sixth auction of dirham treasury bonds oversubscribed 4.5 times

The latest auction received strong demand through the six primary bank dealers

T-bonds are fixed-rate government debt securities that pay semi-annual interest payments until maturity. Pawan Singh / The National
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The sixth auction of the UAE's conventional dirham-denominated treasury bonds was oversubscribed by 4.5 times and achieved bids worth Dh6.72 billion ($1.83 billion), the government said on Monday.

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

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

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 success is reflected in the attractive market-driven price, which was achieved by a spread of an 18-basis point (bps) over US Treasuries for three years, and a spread of 30 bps above US Treasuries for five years, the government said in a statement.

The strong demand was across both tranches with a final allocation of Dh750 million each in the three-year and five-year tranches, with a total of Dh1.5 billion issued in the auction.

The sixth auction followed the practice of reopening the T-bonds which helps in building up the size of individual bond issues over time and improved liquidity in the secondary market, the statement said.

The latest auction of the T-bonds is part of the Dh9 billion T-Bonds issuance programme for this year. The UAE announced the launch of a T-bonds issuance programme for 2022 as part of plans to build a local currency bond market and diversify its financial resources.

The first, second, third and fourth auctions of the UAE's conventional dirham-denominated treasury bonds were oversubscribed 6.3 times, 6.5 times, 5.1 times and 5.7 times, respectively.

“The T-bonds programme will contribute in 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,” the statement said.

The UAE raised $4 billion last year 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.

Updated: December 05, 2022, 3:55 PM
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