Islamic Treasury Bonds Auction for October 2024 Attracts Bids Worth AED 7.20 Billion

The UAE's Ministry of Finance (MoF), in collaboration with the Central Bank of the UAE (CBUAE), has conducted a successful Islamic Treasury Bonds (T-Sukuk) auction in October 2024, attracting bids amounting to AED 7.20 billion. This auction reflects robust demand from investors and signals continued confidence in the nation’s Islamic debt instruments.

This auction is part of the UAE's broader initiative to foster a dirham-denominated yield curve. The program, launched in early 2023, aims to enhance the competitiveness of the local debt capital market while providing secure, Sharia-compliant investment opportunities. The October auction, which involved several tranches maturing over various periods, marks another success in this ongoing effort to stimulate liquidity and strengthen the domestic financial system.

With a target issuance of AED 1.50 billion for the October auction, bids exceeding AED 7 billion resulted in a significant oversubscription. The bonds offered were highly sought after, drawing participation from a diverse group of primary dealers, mainly comprising local and international banks. This level of interest, over four times the amount on offer, mirrors the trend seen in previous auctions, further underscoring the appeal of Islamic bonds amid favorable market conditions.

The success of the October T-Sukuk issuance aligns with broader efforts by the UAE government to diversify its funding sources and develop its financial infrastructure. The bonds issued during this auction provide yields that are competitive, with the yield-to-maturity (YTM) rates aligning closely with U.S. Treasury bonds, a benchmark for global investors. The oversubscription reinforces the growing demand for Islamic finance products both locally and globally.

The Islamic Treasury Bonds program has been a key part of the UAE’s strategy to enhance the domestic financial sector's resilience. By issuing dirham-denominated Islamic bonds, the UAE not only promotes sustainable financial growth but also positions itself as a leading hub for Islamic finance.

These bonds, which are compliant with Islamic finance principles, offer a compelling option for investors seeking ethical, risk-averse products. As global markets remain volatile, the UAE's T-Sukuk provides a stable and secure investment alternative. Additionally, the success of these auctions benefits the broader economy by attracting more capital and promoting sustainable economic development.

This is not the first time the T-Sukuk program has seen strong interest. Earlier in the year, the UAE's treasury bonds drew record bids during auctions held in March and July, with bids consistently exceeding expectations. The government’s strategy to introduce multiple tranches with varied maturities—ranging from two years to five years—has helped cater to different investor profiles, further contributing to the program’s success.
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