The UAE launches Dirham T-bonds as it seeks to beef up local bond market

DUBAI: The United Arab Emirates will issue Dirham-dominated Treasury Bonds, commonly referred to as T-Bonds, with an initial auction size worth AED1.5 billion ($408.4 million), allowing foreign investors to buy bonds in local currency, and to help develop the local bond market.

The Ministry of Finance will represent the issuer and collaborate with the Central Bank of the UAE to issue and pay out the T-Bonds.

Denominated in UAE dirhams, as well as developing the local bonds market, they will also help develop the mid-term yield curve.

Minister of State for Financial Affairs Mohammed Hadi Al- Hussaini said that the Government’s directives and international best practices were followed in the issuance of the T-Bond tranches in UAE Dirhams.

“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,” he said.

According to the WAM, the first auction date, expected in May 2022, will be announced soon. This will be followed by a series of periodic auctions as published in the Ministry’s website’s Issuance Calendar for 2022.

Securities will be issued in tenures of two, three, and five years, auctioned and traded through Bloomberg’s Auction System, and settled through a local platform built and operated by Euroclear Bank. Later on however, 10-year bonds will be issued.

Khaled Mohamed Balama, Governor of the UAE’s Central Bank, said: “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.”

As part of the T-Bonds auction and secondary market development, the ministry has published a primary dealers code, and has six banks on board to act as primary dealers: ADCB, Emirates NBD, FAB, HSBC, Mashreq and Standard Chartered.