Emirates promotes the launch of 1.5 billion dirham treasury bonds

The Ministry of Finance of the United Arab Emirates, in collaboration with the country's Central Bank, has just issued a series of treasury bonds. This is one of the nation's bets to develop its market and these bonds have a value of 1.5 billion Emirati dirhams. These bonds are subject to a new regulatory programme called T-Bonds, which aims to develop the local bond debt market and thus develop the medium-term yield curve.

The first auction of these bonds is expected to be held in May this year. After that, and with a series of regular auctions, the remaining series of the bonds will be issued, although the Ministry of Finance's 2022 Issuance Calendar has not yet published a fixed date for the others. All that is known is that all these bonds will be subject to market conditions at the time, so the date may vary. 

The bonds will be conventional and framed under the country's dirham. Initially, it is expected that the securities obtained will be issued initially within two years, followed by three years and up to five years thereafter. Finally, the value of each bond will take place over ten years thereafter. 

"The issuance of the T-Bonds in local currency will contribute to the creation of a local currency bond market, diversification of funding resources, boosting the local financial and banking sector, as well as offering safe investment alternatives to local and foreign investors," said Mohamed Hadi al-Hussaini, Minister of State for Financial Affairs.

He added that, thanks to government guidelines, the bonds are in line with international best practices. "This issuance will also help build the UAE dirham-denominated yield curve, thus strengthening the local financial market and developing the investment environment," he continued.

For its part, the Ministry of Finance and the Central Bank have worked with other institutions in the country to ensure the security of T-Bonds. To this end, the bank has issued a strong code of primary dealers, which are incorporated in six banks in the country to participate in the auctioning of the primary market and thus, at the same time, to develop the secondary market. These six banks are ADCB, Emirates NBD, FAB, HSCB, Mashreq and Standard Chartered.

The issuance of these bonds is expected to provide a pricing benchmark for other markets in the country. This is intended to improve the capacity to cover some future financing needs in Emirates. It is also worth noting that it offers a number of significant opportunities for some foreign investors to invest in these bonds.

"The launch of the T-Bonds programme represents another milestone towards the development of a local dirham market for securities issued by the public sector in the states and follows the launch of the Currency Bills programme early last year. Thanks to the robust financial market infrastructure developed for this purpose, we are confident that the launch of this programme will enable Emirati market participants to maintain a transparent, unique, diversified and sustainable pool of dirham liquidity," said Khaled Mohamed Balama, Governor of the CBUAE (Central Bank of the United Arab Emirates).

Economic experts also say that these bonds will contribute to the implementation of the new dirham monetary framework. This will allow the establishment of a benchmark for risk-free pricing of the currency, leading to a stimulation of domestic market activities in the UAE.

"The issuance of T-Bonds is the next step in the development of the local capital market. This is made possible by the launch of the innovative end-to-end platform and the creation of a short-term yield curve by the Central Bank early last year," says Euroclear's Head of Global Capital Markets, Sudi Chatterjee. He also says the bond issuance will have a beneficial impact on other domestic activities.