Record-Breaking T-Sukuk Auction by Ministry of Finance and Central Bank of UAE Sheds Light on Dubai’s Financial System Development Strategy

The Ministry of Finance and the Central Bank of the UAE recently announced the results of an auction for Islamic Treasury Sukuk “T-Sukuk” in dirhams. This auction was part of the Islamic Treasury Sukuk issuance program for the third quarter of 2024 and was detailed on the Ministry’s website. The auction attracted strong demand from eight primary distributor banks for the 3- and 5-year tranches, with bids totaling AED 6.76 billion. Despite expectations, the subscription volume exceeded by 6.1 times.

The success of the auction was evident in the attractive market-driven pricing achieved, with yields to maturity (YTM) at 4.77% for the 3-year tranche and 4.43% for the 5-year tranche. These rates were 1 and 3 basis points lower than comparable U.S. Treasury securities at the time of issuance. The local currency Islamic treasury bonds also contribute to building a yield curve denominated in UAE dirhams, providing safe investment opportunities for investors, enhancing the competitiveness of the local debt capital market, improving the investment environment, and supporting economic growth sustainability.

The T-Sukuk issuance program is aimed at increasing liquidity in the local debt capital market and attracting more foreign investors to invest in UAE government securities. It is also seen as a way to diversify financing options available to government entities.

The Ministry of Finance has been working closely with primary distributor banks to ensure that this issuance program is successful, and it has been closely monitoring market conditions to determine when it is best to launch this particular auction.

Overall, this T-Sukuk issuance program is an important step towards developing a more robust financial system in Dubai that can support sustainable economic growth over time.

In conclusion, this auction was a significant success, attracting strong demand from primary distributor banks for both tranches while achieving attractive market-driven pricing that set new benchmarks for local Islamic treasury bonds issuances. The T-Sukuk issuance program has become an integral part of Dubai’s financial system development strategy as it aims to increase liquidity in its debt capital market while enhancing its competitiveness on a global scale.