The Ministry of Finance (MoF) as the issuer, in collaboration with the Central Bank of the UAE (CBUAE) as the issuing and paying agent, recently announced the results of the Islamic Treasury sukuk (T-sukuk) auction denominated in UAE dirhams, amounting to AED1.1 billion.
This issuance is part of the UAE’s Islamic Treasury sukuk issuance program for the fourth quarter of 2024. The auction witnessed strong demand from eight primary dealers for both tranches maturing in May 2027 and September 2029 of the Islamic Treasury sukuk, with bids amounting to AED5.43 billion ($1.48 billion) and an oversubscription by 4.9 times.
The success of the issuances is evident in the attractive market-driven prices, with a yield to maturity (YTM) of 4.30 percent for the tranche maturing in May 2027 and 4.38 percent for the tranche maturing on September 2029, representing a spread of 4 and 12 bps above U.S. Treasuries with similar maturities at the time of the auction.
Bolstering local debt capital market
The Islamic Treasury sukuk issuance program seeks to contribute to building the UAE dirham-denominated yield curve, providing safe investment alternatives for investors, strengthening the local debt capital market, developing the investment environment, as well as supporting sustainable economic growth.
In October, the Ministry of Finance and CBUAE revealed that the results of the AED 1.1 billion auction witnessed strong demand from eight primary dealers for both tranches maturing in May 2027 and September 2029. The issuances last month received bids worth AED7.2 billion and an oversubscription by 6.5 times.
Read: Abu Dhabi’s Lulu Retail Q3 net profit at $35.1 million on strong sales across markets
UAE’s Islamic finance sector to grow
S&P Global Ratings expects the UAE’s Islamic finance sector to continue to experience robust growth in the near future, buoyed by the strong performance of the non-oil economy. The agency reports a notable increase in sukuk issuance in foreign currencies since the start of the year, particularly within the real estate and financial institutions sectors, as efforts are made to attract more foreign investment.
Dr. Mohamed Damak, global head of Islamic finance at S&P Global Ratings, stated that the global Islamic finance sector is experiencing impressive growth, with total assets reaching $3.3 trillion by the end of 2023, reflecting an 8 percent increase from the previous year. He highlighted that all segments within the industry are witnessing significant growth, especially the Islamic banking sector in the Gulf Cooperation Council (GCC).
Furthermore, Damak emphasized that the UAE’s strong non-oil economy will further enhance the growth of the Islamic banking sector, particularly with the increase in Islamic sukuk issuance. He noted that at the start of the year, there was substantial growth in hard currency sukuk issuance, primarily driven by real estate developers and financial institutions seeking to attract foreign capital through the sukuk market.
