2024-09-23 00:05:00
His Highness Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, First Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, said that the Government’s Treasury Bond Program and Dirham-denominated Islamic Treasury Bond Program The success achieved confirms the soundness of the relevant policies.
His Highness said: “The UAE is continuing to consolidate its position as one of the most competitive and advanced economies in the world. This success reflects the country’s strong creditworthiness and significant economic capabilities, supporting the strong performance of the country’s financial sector , contributes to achieving sustainable growth, creates safe and advanced investment options denominated in UAE dirhams for investors, and improves the country’s investment environment.
His Highness stressed the importance of continuing efforts to initiate and support transformational initiatives and projects that contribute to the development of the country’s financial sector and support its future strategic plans, noting the importance of strengthening partnerships with all parties to achieve effective goals. Integrate development and implementation of strategic projects and commit to proactive initiatives that ensure readiness for the future and meet the aspirations of the next phase and contribute to strengthening the comprehensive and sustainable development process witnessed by the UAE.
This comes as the Ministry of Finance announced the results of the government’s treasury bonds and Islamic treasury bonds program to be launched in 2022.
His Highness stressed in the “Blog” of the “X” platform yesterday that “this success confirms the strong confidence in the investment environment in the UAE, reflects the strength of our financial performance, and the ability to provide safe and advanced investment options, confirmed today by Its position as the most attractive financial investment destination among global economic indicators.
His Highness added: “With the vision of our wise leadership and ambitious financial policies, there are no limits to what we can achieve, keeping the UAE at the forefront of the nation.”
The Ministry of Finance has announced that the government’s Treasury Bond Program and the Dirham-denominated Islamic Treasury Sukuk Program have achieved extraordinary success, with AED 11.2 billion worth of Treasury bonds issued since its launch and Sukuk worth AED 138 by the end of August last year. AED 25 billion, reflecting the high level of confidence enjoyed in the investment environment of the UAE as one of the most competitive and advanced economies in the world, and confirming the Ministry of Finance’s forecasts. Increase federal resources and effectively develop them to diversify revenue sources to ensure that high standards of the UAE financial system are maintained.
The ministry said it disbursed two-year treasury bonds totaling Dh4.85 billion in May 2024, bringing the total outstanding bonds to Dh6.35 billion, bringing the total outstanding internal public debt of the government treasury debt and Islamic banks to Dh6.35 billion. amounting to AED 6.35 billion.
The UAE received an AA-sovereign credit rating from the international credit rating agency Fitch with a stable outlook, and a credit rating of “Aa2” from the international credit rating agency Moody’s, which is the strongest sovereign rating in the region.
In 2022, a treasury bond program was launched in cooperation with the Central Bank of the United Arab Emirates as the issuing and payment institution to issue government treasury bonds (T-Bonds) denominated in local currency (Dirham) through the local platform “Peng” operated by the European Bank for Settlements. “Bo Auction System” for settlement.
Banks responsible for managing the subscription process, represented by six major banks in the UAE including Emirates National Bank, Abu Dhabi Commercial Bank, First Abu Dhabi Bank, Mashreq Bank, HSBC and Standard Chartered Bank, have also been appointed. Main distributor of this product.
In 2022, bonds worth 9 billion dirhams were issued under the plan, which were divided into six auctions by the end of the year, with each auction amounting to 1.5 billion dirhams. In 2023, two more bonds worth 2.2 billion dirhams were launched. The bond auction brought the total amount of bonds issued under the Treasury Bond Program to Dh11.2 billion.
On May 11, the ministry paid a total of Dh4.85 billion on two-year bonds, bringing the total outstanding bonds to Dh6.35 billion.
Demand for the first auction was very high, with bids worth AED 9.4 billion received and oversubscribed by 6.3 times. .
The second auction of the Treasury Program saw strong demand from the six major distributing banks, with bids worth AED 9.7 billion received and oversubscribed by 6.5 times, a success reflected in market-driven premiums. The spread on U.S. Treasuries is 27 basis points, and the spread on three-year U.S. Treasuries is 25 basis points.
Demand for the third Treasury auction was strong, with bids of AED 7.6 billion received and oversubscribed 5.1 times. Its success was reflected in its unique market-driven price. The difference in 1-year U.S. Treasuries is 15 basis points.
The first batch of five-year government bonds was launched in the fourth auction in September 2022. A total of bids worth AED 8.6 billion were received for the two tranches (two-year and five-year), with subscriptions exceeding 5.7 times. Its success is reflected in The unique price paid by the market is 8 basis points different from the two-year Treasury note and 20 basis points different from the five-year Treasury note.
The fifth auction also saw strong demand, with bids worth Dh7.57 billion for two- and three-year terms, five times more than subscribed and at a premium of 8-17 basis points over US Treasuries with similar terms.
In the sixth auction, the three- and five-year tranches received bids worth AED 6.72 billion and were oversubscribed 4.5 times, with special bids 18-30 basis points higher than last year. Price Realization.
In the first auction of 2023, a total of Dh1.1 billion of bonds were issued, divided into two- and five-year terms, and a total of bids worth Dh6.85 billion were received, exceeding the subscription size by 6.2 times , and achieved a difference of 10-15 basis points from the national debt at a special price. The second auction in 2023 was also successful, receiving bids worth AED 5.51 billion, exceeding the subscription scale by five times, and the price difference was 5 -15 basis points.
Following the success of the dirham-denominated government treasury bond program, the UAE government announced the launch of a dirham-denominated Islamic treasury bond program, with the Ministry of Finance as the issuing agency and the UAE Central Bank as the issuing and payment agency. In the treasury bond program, The same major issuers as the Treasury program were also named, and two more banks were added, namely Abu.
The UAE government, represented by the Ministry of Finance, has launched five planned Islamic treasury bond auctions during 2023, with each auction worth AED 1.1 billion and a total value of AED 5.5 billion.
These auctions have seen increased demand from banks entrusted with managing the underwriting process.
This year, as of August 31, the ministry has conducted six additional auctions under the Islamic Bond Program totaling Dh8.3 billion, bringing the total outstanding debt under the Islamic Bond Program to Dh13.8 billion. Domestic public debt totals AED 13.8 billion.
The turnover of the first auction reached 8.3 billion dirhams, which exceeded the subscription volume by 7.6 times and was 3 basis points lower than that of U.S. government bonds, indicating the huge demand of local investors for Islamic government bonds in the local market.
The second auction also achieved positive results, with the bidding amount of approximately 6.9 billion dirhams, which exceeded the subscription volume by 6.2 times and was 4 basis points different from U.S. Treasury bonds.
In the third auction, bids were estimated at about 6 billion dirhams, 5.5 times more than subscribed and 2 basis points behind U.S. Treasuries.
In the fourth auction, the bidding amount reached 6 billion dirhams, which was 5.5 times higher than the subscription volume and a difference of 4 to 13 basis points from U.S. Treasuries.
In the fifth and final auction in 2023, the bid value is estimated to be approximately AED 5.8 billion, which exceeds the subscription size by 5.2 times and is 4 to 11 basis points different from U.S. Treasuries.
This year’s auction results showed an increase in primary market demand for Islamic Treasury bills, as well as an increase in sukuk auctions from primary distributors, with the sixth auction in January receiving bids worth AED 9.3 billion (worth AED 2.8 billion The special batch of dirhams (the issuance period of dirhams is five years) has been subscribed more than 3.3 times.
In the seventh auction in February, bids amounted to Dh7.6 billion, exceeding subscriptions by 6.9 times. As of the end of the first quarter of this year, the transaction volume of the eighth auction in March reached 7.8 billion dirhams, exceeding the subscription volume by 7.1 times.
The success of the scheme continued in the ninth auction in May, which received bids worth AED 9.81 billion, exceeding subscription size by 8.9 times; in the tenth auction in July, bids worth AED 6.76 billion were received The bid of dirhams exceeded the subscription size by 8.9 times. rate, which costs 5 to 14 basis points less than U.S. Treasuries of similar maturities.
Government Treasury Bonds (T-Bonds) and Islamic Treasury Bonds (T-Sukuk) denominated in local currencies (Dirhams) work to establish local currency denominated bond markets and develop the overall medium-term yield curve.
These bonds and sukuk include those with maturities of two, three and five years, with bonds and sukuk issued for longer maturities.
Issuing these bonds and sukuk in local currency, besides providing local and foreign investors with a safe investment option in local currency, will also help diversify sources of financing, revitalize the local financial and banking sector, and strengthen the country’s ability to meet local financing needs for the future required capabilities.
• With the vision of our wise leadership and ambitious financial policies, there are no limits to what we can achieve, keeping the UAE at the forefront of the nation.
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