Fourth auction of Treasury bills in dirhams oversubscribed 5.7 times

The fourth UAE dirham-denominated conventional treasury bond auction was more than 5.7 times oversubscribed and reached bids worth 8.6 billion dirhams ($2.34 billion). ), the government announced on Monday.

The latest auction, which saw the first issue of five-year Treasury bonds, received strong demand through all six major bank brokers.

Treasury bonds are fixed-rate government debt securities that pay interest semi-annually until maturity. They are also considered a relatively risk-free online financial encyclopedia. Investopedia said.

In the Treasury Bond Auction, the Government of the United Arab Emirates is represented by the Ministry of Finance as the issuer, together with the Central Bank of the United Arab Emirates as the issuing agent and payment.

The success is reflected in the attractive market-determined prices, which were achieved by an 8 basis point (bp) spread on US Treasuries for two years and a 20 basis point spread on Treasuries American for five years, the government said in a statement. .

The two-year tranche reached a demand of Dh3.95 billion, while the five-year tranche reached a demand of Dh4.65 billion.

The new five-year Treasury bonds will help strengthen the local debt capital market and build the UAE dirham-denominated yield curve, said Mohamed bin Hadi Al Hussaini, Minister of State for Business. financial institutions of the United Arab Emirates.

Establishing an active market for trading Treasury bonds will increase the efficiency of pricing and capital allocation and support the development of a broader capital market. It also offers foreign investors safer alternatives to invest in the local currency, Mr. Al Hussaini said.

“Treasury bonds support the country’s financial and economic policies aimed at achieving comprehensive and sustainable economic development,” he added.

“They also help boost the financial market and credit structure, and create a multi-investment environment that helps make the UAE an ideal investment destination, especially as the country enjoys a strong credit rating by international credit agencies”.

The treasury bond program supports the UAE’s efforts to cover future financing needs. These bonds also contribute to diversifying sources of financing and reducing dependence on foreign capital markets, as part of the transition to the new economic model.

In April, the United Arab Emirates announced the launch of a Treasury bond issuance program for 2022, with a benchmark size of 1.5 billion dirhams, as part of plans to create a market bond in local currency and to diversify its financial resources. This is part of the total Dh9bn T-Bonds issuance schedule for this year.

The first, second and third auctions of conventional treasury bills denominated in UAE dirhams were oversubscribed 6.3 times, 6.5 times and 5.1 times, respectively.

“The issuance of five-year Treasury bonds in the national currency is an advanced step in the UAE’s plans and directions towards diversifying capital market activities, building a dirham-dominated yield curve of the UAE and the achievement of the objectives of the monetary framework in dirham”, said the Governor of the Central Bank of the UAE. said Khalid Balama.

“It also reflects the robustness and stability of the country’s financial system and the confidence of local and international investors, thereby strengthening the UAE’s position as a global financial hub.”

The UAE raised $4 billion last year through the issuance of multi-tranche sovereign bonds, the first time it has issued bonds at the federal level.

The bond package, which is denominated in US dollars, included 10- and 20-year medium- and long-term conventional tranches, as well as 40-year dual-rated Formosa bonds, the ministry said at the time.

Updated: September 14, 2022, 7:05 a.m.

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