AED 25 Billion In Issuances Of Government Treasury Bonds And Islamic Treasury Sukuk

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 of the Government Treasury Bonds Programme and the Dirham-denominated Islamic Treasury Sukuk Programme reflects the sound investment policies adopted by the UAE, which contribute to strengthening its position as a globally attractive and nurturing investment destination.

Sheikh Maktoum made these remarks as the Ministry of Finance released the results for the Government Treasury Bonds and Islamic Treasury Sukuk programmes, which were launched in 2022.

Enhancing the Investment Environment

His Highness said: "The UAE continues to cement its position as one of the most competitive and advanced economies in the world. This success reflects the country’s strong creditworthiness and substantial economic capabilities, which support the robust performance of the financial sector and contribute to sustainable growth, providing secure and advanced investment alternatives denominated in UAE dirhams for investors, and enhancing the investment environment in the country."

He emphasised the importance of continuing efforts to launch and support transformative initiatives and projects, which contribute to the development of the financial sector and support the country’s future strategic plans. He also highlighted the significance of strengthening partnerships with all entities and achieving effective integration in implementing developmental and strategic projects, working on proactive initiatives to ensure future readiness, meet the aspirations of the coming phase, and contribute to the comprehensive and sustainable development witnessed by the UAE.

Diversifying Income Sources

The Ministry of Finance announced that the Government Treasury Bonds Programme and the Dirham-denominated Islamic Treasury Sukuk Programme have achieved exceptional success. Since their launch until the end of August 2024, they have issued Treasury Bonds worth AED 11.2 billion and Islamic Treasury Sukuk worth AED 13.8 billion, totalling AED 25 billion. This reflects the high confidence in the UAE’s investment environment as one of the most competitive and advanced economies globally and underscores the Ministry of Finance’s commitment to efficiently developing and diversifying federal resources to maintain high standards for the UAE’s financial system.

The Ministry added that it had settled the value of its two-year Treasury bonds, amounting to AED 4.85 billion in May 2024, bringing the total outstanding bonds to AED 6.35 billion. As a result, the total outstanding domestic public debt for both the Government Treasury Bonds Program and the Islamic Treasury Sukuk Program reached AED 20.15 billion by the end of August 2024.The UAE has also achieved a sovereign credit rating of AA- with a stable outlook from Fitch Ratings and received an Aa2 rating in creditworthiness, the highest sovereign credit rating in the region, with a stable outlook by the international rating agency, Moody's,

Treasury Bonds Programme "T-Bonds"

In 2022, the Treasury Bonds Programme was launched in collaboration with the Central Bank of the UAE as the issuance and payment agent, for issuing Government Treasury Bonds T-Bonds denominated in the local currency (dirham). These bonds are settled through a local platform, "Bloomberg Auction System," according to international standards, and are operated by Euroclear Bank.

The banks appointed to manage the subscription process include six major banks in the UAE: Emirates NBD, Abu Dhabi Commercial Bank, First Abu Dhabi Bank, Mashreq Bank, HSBC, and Standard Chartered Bank, acting as primary distributors for the Treasury Bonds issuance. Bonds worth AED 9 billion were issued under the programme in 2022, divided across 6 auctions by 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 issuance under the Treasury Bonds Programme to AED 11.2 billion. On May 11, 2024, the Ministry repaid AED 4.85 billion of two-year Treasury Bonds, bringing the total outstanding bonds to AED 6.35 billion.

The first auction saw extremely high demand with bids worth AED 9.4 billion, surpassing the subscription size by 6.3 times, reflected in the premium prices paid in the market with a difference of 28 basis points over two-year US Treasury Bonds and 29 basis points over three-year US Treasury Bonds.

The second auction of the Treasury Bonds Programme saw strong demand from the six primary distributing banks with bids amounting to AED 9.7 billion, exceeding the subscription size by 6.5 times, with premium market prices achieved at a difference of 27 basis points over two-year US Treasury Bonds and 25 basis points over three-year US Treasury Bonds.

The third auction experienced strong demand with bids worth AED 7.6 billion, exceeding the subscription size by 5.1 times, reflected in premium market prices achieved with a difference of 16 basis points over two-year US Treasury Bonds and 15 basis points over three-year US Treasury Bonds.

The first five-year Treasury Bond auction was held in September 2022, with total bids amounting to AED 8.60 billion across two tranches (two years and five years), surpassing the subscription size by 5.7 times, with premium market prices achieved with a difference of 8 basis points over two-year US Treasury Bonds and 20 basis points over five-year US Treasury Bonds.

The fifth auction also saw strong demand with bids worth AED 7.57 billion across two-year and three-year tranches, exceeding the subscription size by 5 times, with premium prices achieved with a difference of 8-17 basis points over US Treasury Bonds of similar maturities. In the sixth auction, bids totalled AED 6.72 billion across three-year and five-year tranches, exceeding the subscription size by 4.5 times, with premium prices achieved with a difference of 18-30 basis points over US Treasury Bonds of similar maturities.

In the first auction of 2023, AED 1.1 billion worth of bonds were issued, divided across two-year and five-year tranches, with bids totalling AED 6.85 billion, surpassing the subscription size by 6.2 times, with premium prices achieved with a difference of 10-15 basis points over US Treasury Bonds of similar maturities. The second auction of 2023 also succeeded, with bids totalling AED 5.51 billion, exceeding the subscription size by 5 times, with premium prices achieved with a difference of 5-20 basis points over US Treasury Bonds of similar maturities.

Islamic Treasury Sukuk Programme "T-Sukuk"

Following the success of the Dirham-denominated Government Treasury Bonds Programme, the UAE Government, represented by the Ministry of Finance as the issuer, in collaboration with the Central Bank of the UAE as the issuance and payment agent, announced the launch of the Dirham-denominated Islamic Treasury Sukuk Programme. The same distinguished practices and international standards used in the Treasury Bonds Programme were applied, and the same primary distributors were appointed, with the addition of two more banks, Abu Dhabi Islamic Bank and Dubai Islamic Bank.

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