Bonds provide protection against stock market and real estate crashes Image Credit: Shutterstock

Abu Dhabi: Abu Dhabi cut interest rate on sale of $2 billion of dollar bonds after its first borrowing since August attracted bids that tripled the amount on offer. The seven-year notes attracted $6.9 billion in demand, a person familiar with the matter said.

The emirate is taking advantage of low borrowing costs after a spike in price pressures fueled concerns that the US Federal Reserve may tighten its monetary policy. The UAE's dirham is pegged to the dollar.

Abu Dhabi has one of the highest investment grades in the Middle East and Africa. Still, the government has budgeted for a deficit of Dh43 billion in 2021, which will be funded mainly by borrowings. Abu Dhabi has the third-highest rating from the three major credit assessors. The emirate raised $5 billion in August through a three-tranche bond offering.

The yield on its $3 billion bond due 2029 was near 1.94 per cent as of 2:45 p.m. in New York.