UAE’s 3rd Auction of Islamic Treasury Bonds in 2023 Oversubscribed 5.5 Times
The Ministry of Finance declared success for the 3rd United Arab Emirates’ dirham-denominated treasury sukuk auction by accepting 5.5 times more bids than the amount offered. Investors showed intense interest for the securities through their 6 billion dirhams (1.63 billion dollar) worth of bids during the auction. The government continues to support its Sharia-compliant treasury bonds initiative through this treasury bonds issuance during the present year
The Ministry announced that the third auction’s debenture bonds for five-year maturity displayed subscription rates reaching 6.6 times their value due to high investor interest in Sharia-compliant treasury sukuk denominated in dirham.
T-sukuk represents financial certificates following Sharia standards that function through a distinctive operating framework. According to Investopedia, the entity that issues sukuk, sells certificates to investors to purchase assets using the investment funds which becomes the property of the investors. Investors are given a collective ownership stake in the underlying asset under this arrangement.
As the second biggest economy in the Arab World, the UAE strengthens its financial stability through diverse investment sources and development of Islamic economic sectors.
The UAE government revealed that the annual treasury sukuk issuance auctions in dirhams received 7.6 times more bids than the amount offered, during the month of May. The received bids reached 8.3 billion dirhams while the previous auction attracted 1.1 billion dirhams.
The Ministry declared that the T-sukuk program would act as a key instrument for building a durable yield curve based on UAE dirham denominations. The initiative provides secure investment opportunities to investors while simultaneously strengthening the domestic debt capital market (DCM) to support sustainable economic growth.
As the issuing and payment agent, the UAE Central Bank works hand in hand with the Ministry of Finance that represents the government to facilitate Islamic treasury bonds issuance at auctions.
The Ministry’s latest report shows that 8 primary bank dealers actively engaged in the latest auction. The five-year segment together with the two-year segment received notable demand from the bank dealers during this auction. The market’s competitive nature led to successful auction prices which stayed within a tight margin from zero to two basis points above equivalent US Treasuries.
The secondary market received support for growth with better liquidity through the two-year T-sukuk reopening in the auction. The reopening approach represents a method to boost the individual size of sukuk issues in the long run.
