UAE T-bonds oversubscribed 5.1 times in third auction

The third auction of the UAE Dh9 billion T-Bond programme for 2022, which has been rolled out to strengthen liquidity in the secondary market, received bids worth Dh7.6 billion, recording an oversubscription by 5.1 times, the Ministry of Finance (MoF) said on Monday.

The strong demand witnessed through the six primary bank dealers was across both tranches with a final allocation of Dh750 million for the 2-year tranche and Dh 750 million for the 3-year tranche, with a total of Dh1.5 billion issued in the third auction, the ministry said in a statement.

Treasury bonds are relatively risk-free fixed-rate government debt securities that pay semi-annual interest payments until maturity. They are issued as part of the government's plans to build a local currency bond market and diversify financial resources. The second auction of the federal treasury bonds was held on June 20 this year.

“The success is reflected in the attractive market-driven prices, which was achieved by a spread of 16 bps over US Treasuries for two years, and a spread of 15 bps over US Treasuries for 3 years. The third auction followed the practice of re-opening the T-Bonds which helps in building up the size of individual bond issues over time and improves liquidity in the secondary market,” the MoF said.

The T-Bonds programme, issued by the MoF in collaboration with the Central Bank of the UAE as the paying agent, will 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, it said.

The UAE’s T-bonds programme was first announced by the Ministry of Finance in April. The ministry plans to issue six treasury bond tranches in 2022 with a total value of Dh9 billion. Tranches are being issued with various tenures for up to five years on different dates this year. Ten-year tranches would be issued at a later time.

The first issuance of Dh1.5 billion on May 12 was oversubscribed 6.3 times and received bids worth Dh9.4bn amid strong demand from regional and global investors.

Analysts said the remarkable success of the three issuances emphasises the UAE's creditworthiness as one of the world's most competitive and highly advanced economies, and its position as an investment destination for investors and entrepreneurs.

— issacjohn@khaleejtimes.com