The UAE Ministry of Finance (MoF), in partnership with the Central Bank of the UAE (CBUAE) as the issuing and paying agent, has announced the results of its latest Islamic Treasury Sukuk (T-Sukuk) auction, which was denominated in UAE dirhams and raised AED1.1 billion. This auction is part of the Islamic T-Sukuk issuance program for the fourth quarter of 2024, as detailed on the Ministry’s website.
The auction attracted interest from eight primary dealers for both tranches maturing in May 2027 and September 2029, with total bids reaching AED7.2 billion ($1.96 billion) — an oversubscription of 6.5 times. This strong demand is reflected in competitive market-driven pricing, yielding 4.10 percent for the May 2027 tranche and 4.12 percent for the September 2029 tranche. These yields represent spreads of 10 and 12 basis points over US Treasuries with comparable maturities at the time of the auction.
Contribution to economic growth
The Islamic T-Sukuk issuance program aims to enhance the UAE dirham-denominated yield curve, offering secure investment options for investors, bolstering the local debt capital market, and fostering a more robust investment climate, all while supporting sustainable economic growth.
Last month, the MoF highlighted the remarkable success of both the government treasury bonds program and the dirham-denominated Islamic treasury sukuk program since their inception in 2022. By the end of August 2024, these programs collectively issued treasury bonds totaling AED11.2 billion (approximately $3.05 billion) and Islamic treasury sukuk worth AED13.8 billion (around $3.76 billion), culminating in a total issuance of AED25 billion (about $6.81 billion).
Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, First Deputy Ruler of Dubai, Deputy Prime Minister, and Minister of Finance, stated that the UAE is continuing to strengthen its position as one of the most competitive and advanced economies globally. He noted that this achievement highlights the country’s strong creditworthiness and substantial economic capabilities, which play a significant role in the thriving performance of the financial sector and the promotion of sustainable growth.
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Outstanding bonds and public debt
Currently, the total outstanding bonds stand at AED6.35 billion. The ministry has also settled its two-year treasury bonds amounting to AED4.85 billion in May 2024, resulting in total outstanding domestic public debt for both programs reaching AED20.15 billion by the end of August 2024.
Sovereign credit ratings and investment confidence
The UAE has achieved a sovereign credit rating of AA- with a stable outlook from Fitch Ratings, alongside an Aa2 rating from Moody’s, which is the highest sovereign credit rating in the region. This reflects strong confidence in the UAE’s investment climate, affirming the ministry’s dedication to efficiently developing and diversifying federal resources to uphold high standards within the UAE’s financial system.
UAE’s treasury bonds program
Also, in 2022, the UAE introduced its treasury bonds program in collaboration with the central bank as the issuance and payment agent. The initiative further aimed to issue government treasury bonds (T-bonds) in the local currency, settled through the “Bloomberg Auction System,” which adheres to international standards and is managed by Euroclear Bank.
In its inaugural year, the program issued AED9 billion in bonds across six auctions, each worth AED1.5 billion. In 2023, two additional auctions totaling AED2.2 billion were conducted, bringing the total issuance under the treasury bonds program to AED11.2 billion. Additionally, on May 11, 2024, the ministry repaid AED4.85 billion in two-year treasury bonds, leaving outstanding bonds at AED6.35 billion.
Moreover, the UAE conducted its first five-year treasury bond auction in September 2022, attracting total bids of AED8.60 billion across two tranches (two-year and five-year), exceeding the subscription size by 5.7 times.
Launch of the Islamic treasury sukuk program
Building on the success of the government treasury bonds program, the UAE government announced the launch of the dirham-denominated Islamic treasury sukuk program. In 2023, five auctions were held under this program, each valued at AED1.1 billion, resulting in a total of AED5.5 billion. Furthermore, in 2024, the ministry organized six additional auctions, raising AED8.3 billion. Consequently, the total outstanding under the Islamic treasury sukuk program reached AED13.8 billion, with the overall internal public debt for both programs totaling AED20.15 billion.
Highlights of MoF’s financial achievements in 2023
In July 2024, the Ministry of Finance (MoF) published its 2023 yearbook, titled “Leadership in Development and Global Partnerships for Sustainable Finance.” This publication showcased the ministry’s key achievements, financial statements, national initiatives, and projects completed throughout the year.
The yearbook further emphasized that 2023 marked a successful period for the ministry’s bond issuance and Islamic Treasury Sukuk programs. Notably, two auctions were conducted under the government treasury bonds program, along with five auctions for the Islamic Treasury Sukuk program. Additionally, a new sovereign bond package valued at $1.5 billion was introduced, significantly furthering the ministry’s primary objectives of establishing a dirham yield curve and attracting foreign investments.
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