Dubai: Dubai aims to cash in on strong demand for high-yielding emerging market debt with its first foray since the Dubai World restructuring was announced.

Analysts said the emirate's dollar bond issue, weeks after its flagship conglomerate clinched a debt restructuring deal, was timed to take advantage of more favourable market conditions than at any time since the Dubai crisis broke.

"The Dubai World issue is out of the way now. This is probably the best time to go to the market," said Robert McKinnon, chief investment officer at ASAS Capital.

"The most important point here is Dubai is increasing transparency by going to the market. Going to the market for funds definitely says that Dubai is showing some confidence."

Earlier this month, Dubai World reached a formal deal to restructure $24.9 billion (Dh91.3 billion) in debt.

Dubai said on Monday it would launch a benchmark dollar bond through the government's European Medium-Term Note programme launched in April 2008. The emirate last tapped markets in October 2009.

Favourable conditions

"The motivation for the timing is that market conditions are probably more favourable now than at any other time year-to-date," said Khatija Haque, economist and vice president at Shuaa Capital. "If the bond issue is well received and there is sufficient demand, we would not be surprised if Dubai raised more than $1 billion."

Haque said the emirate was also likely keen to keep building a yield curve — it issued bonds in the third or fourth quarters in both 2009 and 2008 — and help set a benchmark for other government-related firms which may come to the market.

Investor hunger for decent yields, particularly in emerging markets, may help make Dubai's return a success.

"The objective here is to be able to raise funds at lower cost of borrowing," said Mohammad Yasin, chief investment officer for CAPM Investment. "Last year, the $1.25 billion sukuk was priced at 6.39 per cent. If the new offer is below 6 per cent, that would represent a success."

The overall interest in this bond and potential oversubscription may boost market sentiment, said Fadi Al Said, lead fund manager for ING Investments' Mena fund and head of Mena equities.

"There are indications that it is gaining a lot of interest among investors. The Dubai government will definitely set a benchmark with this issue. It will set a yield curve based on which other entities from the region may issue debt in the future," Yasin said.