UAE Treasury Sukuk Auction Sees 7X Oversubscription

The recent auction of the UAE's Islamic Treasury Sukuk marked a significant milestone, with a total value of 1.1 billion dirhams ($299.5 million).

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This auction garnered remarkable attention from investors, as it was oversubscribed by more than seven times, with bids reaching a staggering AED7.83 billion for both the three-year and five-year tranches. The finance ministry announced these impressive figures on Tuesday, reflecting the strong demand for Sharia-compliant investment opportunities in the region.

Part of the government's broader initiative to diversify funding sources, this issuance was conducted under the Sharia-compliant treasury bonds program, aiming to raise AED5 billion dirhams. The terms of the sukuk issuance were particularly attractive to investors, carrying a spread of 4 basis points over equivalent US Treasuries with similar maturities. This competitive pricing ensured favorable conditions for both local and international investors seeking Islamic investment options.

Islamic T-Sukuk, as asset-backed financial instruments, adhere strictly to Islamic Sharia principles. Their profitability and maturity payments are intricately tied to the performance of the issuer's underlying assets, ensuring compliance with Islamic finance principles. In this context, the ministry highlighted the crucial role of the Islamic T-Sukuk issuance program in fostering the development of the UAE's dirham-denominated yield curve. Additionally, it provides investors with secure and Sharia-compliant investment alternatives, strengthening the local debt capital market and fostering sustainable economic growth.

The successful sukuk issuance was facilitated through the collaboration of eight primary dealers, with the UAE Central Bank acting as the issuing and payment agent. This efficient distribution mechanism ensured broad participation from various market players, further underscoring the robust demand for Islamic financial instruments in the UAE.

The government's strategic endeavor to issue dirham-denominated T-bonds and T-sukuk underscores its commitment to financial diversification and resilience. Commencing with T-bond issuances in 2022 and followed by T-sukuk in 2023, these initiatives reflect the UAE's proactive approach to enhancing its financial landscape and attracting diverse sources of funding. Such efforts play a pivotal role in strengthening the UAE's position as a leading hub for Islamic finance and promoting sustainable economic development in the region.

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