The UAE Ministry of Finance (MoF) and the Central Bank of the UAE (CBUAE) held an auction for the Islamic Treasury Sukuk (T-Sukuk). It’s a strategic initiative by the federal government to enhance its financial markets and provide investment opportunities.
This successful collaboration between the MoF, the issuer, and the CBUAE, as the issuing and paying agent, was instrumental in bringing T-Sukuk to the market. Their joint efforts and expertise were crucial to the success of the auction.
The auction received substantial interest for the third quarter of the fiscal year 2024, mainly from eight primary dealers. Bids totalled AED6.76 billion, and the oversubscription rate was 6.1 times. This indicates that the demand significantly exceeded the supply.
The three-year tranche of the T-Sukuk achieved a competitive yield to maturity (YTM) of 4.77 per cent. On the other hand, the five-year tranche achieved a YTM of 4.43 per cent. These yields were one to three basis points (bps) lower than the United States (US) Treasuries with similar maturities.
Overall, the programme helps establish a comprehensive range of interest rates issued and traded in UAE dirhams. It ensures transparency in the local market for sukuk pricing. Besides, T-Sukuk also guarantees investors secure and shariah-compliant investment options.
The T-Sukuk programme is also believed to strengthen the local debt capital market by enhancing financial infrastructure. This will attract more investors and boost the market’s credibility.
Beyond that, the programme seeks to support the sustainable growth of the UAE’s economy by promoting Islamic finance instruments like T-Sukuk.
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