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His Highness Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, First Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, stressed that the success achieved by the Government Treasury Bonds Programme and the Islamic Treasury Sukuk Programme denominated in dirhams confirms the sound policies related to the investment targets pursued by the UAE, which contributes to strengthening its position as an attractive global destination and incubator for financial investments.
This came during the Ministry of Finance’s announcement of the results of the government treasury bonds and Islamic treasury sukuk programs, which were launched in 2022.
His Highness said: “The UAE is continuing to consolidate its position as one of the most competitive and advanced economies in the world. This success is a reflection of the country’s strong creditworthiness and tremendous economic capabilities, which support the strong performance of the country’s financial sector and contribute to enabling sustainable growth, creating safe and advanced investment alternatives denominated in the UAE dirham for investors, and improving the investment environment in the country.”
His Highness stressed the importance of continuing efforts to launch and support transformational initiatives and projects, which contribute to developing the financial sector in the country and support its future strategic plans, pointing out the importance of strengthening partnership with all parties and achieving effective integration in implementing development and strategic projects, and working on proactive initiatives that ensure readiness for the future, meet the aspirations of the next stage and contribute to enhancing the comprehensive and sustainable development process witnessed by the UAE.
His Highness said via the “X” platform: “The government treasury bonds and sukuk programme launched by the Ministry of Finance in 2022 has achieved exceptional successes, as it witnessed, since its launch until the end of August 2024, the issuance of treasury bonds worth AED 11.2 billion, and Islamic treasury sukuks worth AED 13.8 billion, for a total of AED 25 billion, and treasury bonds for a period of two years were repaid for a total of AED 4.85 billion in May 2024.”
His Highness stressed, “With the vision of our wise leadership and ambitious financial policies, there is no limit to what we can achieve to keep the UAE at the forefront of nations.”
His Highness added, “This success confirms the firm confidence in the UAE’s investment environment. It reflects the strength of our financial performance and ability to provide safe and advanced investment alternatives, and today confirms the UAE’s position as an attractive global destination for financial investments that tops global economic indicators.”
Exceptional successes
The Ministry of Finance announced that the government treasury bonds programme and the dirham-denominated Islamic treasury sukuk programme have achieved exceptional successes, as they have witnessed, since their launch until the end of August 2024, the issuance of treasury bonds worth AED 11.2 billion and Islamic treasury sukuks worth AED 13.8 billion, for a total of AED 25 billion, which reflects the high confidence enjoyed by the investment environment in the UAE, one of the most competitive and advanced economies in the world, and confirms the keenness of the Ministry of Finance to develop and develop federal resources efficiently with the aim of diversifying sources of income in a way that ensures maintaining the high standards of the financial system of the UAE.
The ministry indicated that it paid the value of two-year treasury bonds totaling AED 4.85 billion in May 2024, bringing the total outstanding bonds to AED 6.35 billion. Thus, the total outstanding domestic public debt for the government treasury bond and Islamic treasury sukuk programmes amounted to AED 20.15 billion, until the end of August 2024. The UAE obtained a sovereign credit rating of AA- with a stable outlook from Fitch Ratings, and an “Aa2” creditworthiness rating, which is the strongest sovereign rating in the region with a stable outlook, from Moody’s International Rating Agency.
Treasury bonds
During 2022, the Treasury Bonds Program was launched in cooperation with the Central Bank of the United Arab Emirates as the issuing and paying agent, to issue government treasury bonds “T-Bonds” denominated in the local currency (dirhams). These bonds are settled through a local platform “Bloomberg Auction System” in accordance with international standards, and are operated by “Euroclear” Bank.
The banks entrusted with managing the subscription process, represented by six major banks in the UAE, including: Emirates NBD, Abu Dhabi Commercial Bank, First Abu Dhabi Bank, Mashreq Bank, HSBC Bank, and Standard Chartered Bank, have also been appointed as primary distributors for the issuance of treasury bonds.
Bonds worth AED 9 billion were issued under the programme for 2022, divided into 6 auctions until the end of the year, with AED 1.5 billion in each auction. In 2023, two additional auctions worth AED 2.2 billion were launched, bringing the total issued under the treasury bond programme to AED 11.2 billion.
On 11 May 2024, the Ministry paid the value of the two-year Treasury bonds totaling AED 4.85 billion, bringing the total outstanding bonds to AED 6.35 billion. The first auction achieved very high demand, with bids worth AED 9.4 billion received, and the subscription volume was 6.3 times oversubscribed. The success was reflected in the attractive market-driven prices achieved at a spread of 28 basis points over two-year US Treasuries and a spread of 29 basis points over three-year US Treasuries.
The second auction of the Treasury Bonds Programme witnessed strong demand from the six primary distributor banks, with bids worth AED 9.7 billion received and the subscription volume was 6.5 times oversubscribed. The success was reflected in the attractive market-driven pricing achieved at a spread of 27 basis points over 2-year US Treasuries and a spread of 25 basis points over 3-year US Treasuries.
The third auction of the Treasury Bonds Programme witnessed strong demand, with bids worth AED 7.6 billion received and the subscription volume exceeded by 5.1 times. The success was reflected in the attractive market-driven prices achieved at a spread of 16 basis points over 2-year US Treasuries and a spread of 15 basis points over 3-year US Treasuries.
The first 5-year Treasury Bonds were launched at the fourth auction in September 2022, receiving bids worth a total of AED 8.60 billion across the two tranches (2-year and 5-year), and were oversubscribed by 5.7 times. The success is reflected in the attractive market-driven pricing achieved at a spread of 8 basis points over 2-year US Treasuries and 20 basis points over 5-year US Treasuries.
The fifth auction also witnessed strong demand, with bids worth AED 7.57 billion received for the two-year and three-year tranches, and the subscription volume was oversubscribed by 5 times, with attractive prices achieved at a spread of 8-17 basis points over US Treasury bonds of similar maturities.
In the sixth auction, bids worth AED 6.72 billion were received for the two tranches for 3 and 5 years, and the subscription volume was exceeded by 4.5 times, at attractive prices achieved by a difference of 18-30 basis points over US Treasury bonds for similar terms. In the first auction of 2023, bonds totaling AED 1.1 billion were issued, divided into two tranches for 2 and 5 years, where bids worth AED 6.85 billion were received, exceeding the subscription volume by 6.2 times, and at attractive prices achieved by a difference of 10-15 basis points over US Treasury bonds for similar terms. The second auction of 2023 was also successful, where bids worth AED 5.51 billion were received, exceeding the subscription volume by 5 times, and at attractive prices achieved by a difference of 5-20 basis points over US Treasury bonds for similar terms.
Islamic Treasury Bonds
Following the success of the UAE Dirham-denominated Treasury Bonds Program, the UAE Government, represented by the Ministry of Finance as the issuing entity, and in cooperation with the Central Bank of the UAE as the issuing and paying agent, announced the launch of the UAE Dirham-denominated Treasury Sukuk Program (T-Sukuk). The distinguished practices and international standards used in the Treasury Bonds Program were applied, and the same main distributors were appointed as those appointed for the Treasury Bonds Program, in addition to the addition of two other banks, namely Abu Dhabi Islamic Bank and Dubai Islamic Bank.
The UAE government, represented by the Ministry of Finance, has launched 5 auctions for the Islamic Treasury Sukuk Program during 2023, with the size of each auction amounting to 1.1 billion dirhams, with a total value of 5.5 billion dirhams.
These auctions witnessed an increase in demand from the banks assigned to manage the subscription process. In 2024 and until August 31, the Ministry launched 6 additional auctions under the Islamic Treasury Sukuk Program, totaling AED 8.3 billion, bringing the total outstanding under the Islamic Treasury Sukuk Program to AED 13.8 billion, and the total outstanding domestic public debt for the government treasury bonds and Islamic Treasury Sukuk programs to AED 20.15 billion. The first auction witnessed bids worth AED 8.3 billion, which exceeded the subscription volume by 7.6 times and by 3 basis points over US Treasury bonds, indicating the great demand of local investors for Islamic Treasury Sukuk in local markets.
The second auction also witnessed positive results, as the value of bids amounted to approximately AED 6.9 billion, which exceeded the subscription size by 6.2 times and by 4 basis points over US Treasury bonds.
In the third auction of the Sukuk programme, the size of the bids was estimated at approximately AED 6 billion, which exceeded the subscription size by 5.5 times, and by a difference of 2 basis points over US Treasury bonds.
During the fourth auction, the value of bids amounted to 6 billion dirhams, and the subscription volume exceeded 5.5 times, with a difference of 4 to 13 basis points over US Treasury bonds.
In the fifth and final auction of 2023, the value of bids was estimated at approximately AED 5.8 billion, which exceeded the subscription volume by 5.2 times and by a difference of 4 to 11 basis points over US Treasury bonds.
The results of the auctions during the current year 2024 show an increase in the demand of the primary markets for Islamic treasury bonds, and a growth in sukuk auctions by primary distributors, as the sixth auction in January received bids worth AED 9.3 billion (an exceptional tranche worth AED 2.8 billion was issued for a period of 5 years) and the subscription volume exceeded 3.3 times. In the seventh auction in February, the value of bids equaled AED 7.6 billion and the subscription volume exceeded 6.9 times. At the end of the first quarter of 2024, the eighth auction in March witnessed bids worth AED 7.8 billion and the subscription volume exceeded 7.1 times.
The success of the programme continued to be evident in the ninth auction in May 2024, where bids worth AED 9.81 billion were received and the offering was oversubscribed 8.9 times; the tenth auction in July 2024, where bids worth AED 6.76 billion were received and the offering was oversubscribed 6.1 times; and the eleventh auction in August 2024, where bids worth AED 6.32 billion were received and the offering was oversubscribed 5.7 times. All auctions during 2024 witnessed exceptional results, represented by the distinctive prices paid by the market, which were achieved at an exceptional yield to maturity rate and at a cost ranging from -5 to -14 basis points over US Treasury bonds of similar maturities.
These bonds and sukuk include tranches with terms ranging from two to three years, and five years, with longer-term bonds and sukuk being issued. Issuing these bonds and sukuk in local currency contributes to diversifying sources of financing, enhancing the state’s ability to cover future financing requirements in local currency, and thus strengthening the local financial market and improving the investment environment in general.
