The UAE issues the first 5-year federal treasury bonds
The United Arab Emirates, represented by the Ministry of Finance, as the issuer, and in cooperation with the Central Bank of the Emirates as the issuing and paying agent, announced the results of the fourth auction of Federal Treasury T-Bonds denominated in UAE dirhams, which witnessed the first issuance of 5-year federal treasury bonds.
The fourth auction of the Treasury Bonds Program - which amounted to 1.5 billion dirhams within the program to issue Treasury bonds with a value of 9 billion dirhams for 2022 - recorded strong demand from the six main distributors, as bids worth 8.6 billion dirhams were received, exceeding the volume of subscription by 5.7 times. The success is reflected in the market driven premium rates achieved by an 8 basis point spread on 2-year US Treasuries, and a 20 basis point spread on 5-year US Treasuries.
Mohammed bin Hadi Al Husseini, Minister of State for Financial Affairs, indicated that the issuance of 5-year federal treasury bonds in the national currency comes as a continuation of efforts to support the development of the local debt market in the Emirati dirham, building a yield curve denominated in the local currency, and establishing an active market for the trading of federal bonds that contribute to raising the efficiency of pricing and allocating Capital, in addition to the establishment of an active market for the trading of federal securities, supports the development of the broader capital market, provides safer investment assets, and provides promising investment opportunities for international investors to invest in the local currency.
He explained that the treasury bond program also contributes to supporting the government's ability to cover future financing requirements, and contribute to diversifying sources of funding and reducing dependence on foreign capital markets, in the context of the transition to the new economic model that keeps pace with future ambitions.
He said, "Government treasury bonds contribute to supporting the country's financial and economic policies aimed at achieving comprehensive and sustainable economic development, strengthening the financial market and credit structure, and creating a multi-investment environment that contributes to making the UAE an ideal destination for investors, as the country enjoys a high-level creditworthiness and a strong evaluation by agencies." International credit, cementing its position as one of the most internationally competitive economies.
In turn, the Governor of the Central Bank of the Emirates, Khalid Muhammad Balama, stressed that the issuance of the Federal Treasury bonds for a period of 5 years in the national currency constitutes a new advanced stage in the UAE’s plans and strategic directions towards diversifying the activities of capital markets, developing the return trend denominated in dirhams, and achieving the objectives of the new monetary framework for the dirham.
It also indicates, at the same time, the strength and stability of the financial system, and the confidence of local and international investors in the country's financial system, thus enhancing its position as a global financial center.
He said: We are confident that the infrastructure developed by the Central Bank in this regard will contribute to enhancing the UAE's ability to develop the financial sector in accordance with monetary policies and strategic plans.
We are pleased with the positive results of our partnership with the Ministry of Finance in developing the financial market and improving the investment environment in the country.
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, issued in May 2022 government treasury bonds denominated in the local currency, the dirham (two tranches for two and three years);
The Ministry of Finance has appointed six agent banks as the primary distributors for participants in the initial auction of T-Bonds and are responsible for developing the secondary market, which includes Abu Dhabi Commercial Bank, Emirates NBD, First Abu Dhabi Bank, HSBC, Mashreq and Standard Chartered.
It is worth noting that the Ministry of Finance and the Central Bank of the UAE are working with all relevant government agencies and international financial bodies, to ensure the adoption and application of global best practices in the Treasury Bond Program.
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