UAE to launch domestic dirhams Treasury Bonds worth Dhs1.5bn

The UAE has announced the launch of conventional dirham-denominated treasury bonds of the Government of the UAE (T-Bonds), with benchmark auction size of Dhs1.5bn (circa $400m).

The UAE, was represented by the Ministry of Finance (MoF) as the issuer, in collaboration with the Central Bank of the UAE (CBUAE) as the issuing and paying agent.

The United Arab Emirates has announced the launch of Domestic Dirhams Treasury Bonds (T-Bonds), represented by the Ministry of Finance (MoF) as the issuer, in collaboration with the Central Bank of the UAE (CBUAE) as the issuing & paying agent.#dirhamstreasurybonds #uae pic.twitter.com/tVwniNbErX

— وزارة المالية | الإمارات (@MOFUAE) April 20, 2022

Subject to market conditions, the first auction date to be held in May 2022 will be announced soon, followed by a series of periodical auctions, official news agency WAM reported.

The conventional T-Bonds will be denominated in dirhams to develop the local bonds debt market, with the ultimate goal to help develop the mid-term yield curve. The securities will be issued initially in two/three/five- year tenures; followed by a 10-year bond later.

The issuance of T-Bonds will propel #growth in national #economy , enabling diversification of funding sources, minimising dependency on foreign capital markets & providing alternative financing resources for the private sector, banks & financial institutions in the #UAE pic.twitter.com/lwnbGLwZzE

— وزارة المالية | الإمارات (@MOFUAE) April 20, 2022

These securities will be auctioned and traded through Bloomberg’s Auction System and settled through a local platform, compliant with international standards, built and operated by Euroclear Bank.

The ministry has published a primary dealers code, and onboarded six banks – ADCB, Emirates NBD, FAB, HSBC, Mashreq and Standard Chartered – as primary dealers to participate in the T-Bonds primary market auction and to develop the secondary market.

Mohamed Hadi Al Hussaini, Minister of State for Financial Affairs, said: “Issuing the T-Bonds in local currency will contribute to building a local currency bond market, diversifying financing resources, boosting the local financial and banking sector, as well as providing safe investment alternatives for local and foreign investors. This issuance will also help build the UAE Dirham-denominated yield curve, thereby strengthening the local financial market and developing the investment environment.”

Al Hussaini added that the issuance provides pricing reference for other UAE markets (bond and equity), enhances the ability to cover future funding needs in UAE dirham, and provides opportunities for foreign investors to invest in UAE dirham-denominated bonds.

Khaled Mohamed Balama, Governor of the CBUAE, said, “The launch of the T-Bonds programme represents another milestone towards the development of a dirham local market for securities issued by the public sector in the UAE and follows the launch of the Monetary Bills programme earlier last year. With the robust financial market infrastructure developed for the purpose, we are confident that the launch of such a programme will enable market participants in the UAE to maintain a transparent, single, diversified and sustainable pool of Dirham liquidity.

“It shall also contribute to the implementation of the new dirham monetary framework and support the ongoing work on establishing the Dirham risk-free pricing benchmark (yield curve), which would stimulate further domestic market activities. We, at the CBUAE, are pleased with the positive outcome of our partnership with MoF, Euroclear, and Bloomberg in this regard.”