UAE Ministry of Finance to launch Treasury Bonds, with first auction set for May
Launch of these securities will help build local bonds market - and a mid-term yield curve
Dubai: The UAE has launched dirham denominated treasury bonds, with a benchmark auction size of Dh1.5 billion (around $400 million). The first auction will likely be in May, and with the date to be announced shortly. This will be followed by other auctions.
The conventional T-Bonds will help develop the local bond market and – ultimately - the ‘aim is to help develop the mid-term yield curve’. The securities will be issued initially in 2-, 3- and 5-year tenures; followed by a 10-year bond at a later date.
“Issuing the T-Bonds in local currency will contribute to building a local currency bond market, diversifying financing resources, boosting the local financial and banking sector, as well as providing safe investment alternatives for local and foreign investors,” said Mohamed Bin Hadi Al Hussaini, Minister of State for Financial Affairs.
This issuance will also help build the UAE Dirham-denominated yield curve, thereby strengthening the local financial market and developing the investment environment.
The upcoming issue provides a pricing reference for other UAE markets (bond and equity), which enhances the ‘ability to cover future funding needs in UAE dirham’. It “provides opportunities for foreign investors to invest in UAE dirham-denominated bonds (in local currency),” he added.
A new monetary framework
According to the UAE Central Bank Governor, Khaled Mohamed Balama, said the dirham-denominated Treasury Bonds will help contribute to the creation of a ‘Dirham Monetary Framework’. Plus, help out with framing a dirham risk-free pricing benchmark (yield curve), “which would stimulate further domestic market activities,” he added.
The launch of the T-Bonds program follows the launch of the Monetary Bills program in early 2021. “With the robust financial market infrastructure developed for the purpose, we are confident that the launch of such a program will enable market participants in the UAE to maintain a transparent, single, diversified and sustainable pool of dirham liquidity,” said the Central Bank Governor.
With the robust financial market infrastructure developed for the purpose, we are confident that the launch of such a program will enable market participants in the UAE to maintain a transparent, single, diversified and sustainable pool of dirham liquidity.
The securities will be auctioned and traded through Bloomberg’s Auction System and settled through a local platform built and operated by Euroclear Bank.