Today's Edition
ANUPAM VARMA (ABU DHABI)
The UAE Ministry of Finance is set to issue its first T-Sukuk for 2024 on January 9.
The issuance of Dh2,800 million worth of Islamic Treasury bonds will be the first of three auctions scheduled for the first quarter this year.
According to the ministry’s calendar, a second auction of bonds worth Dh1,100 million will take place on February 13, while a third auction for an identical amount will take place on March 26. Overall, bonds worth Dh5,000 million will be auctioned in Q1.
The bonds auctioned on January 9 will mature on January 11, 2029.
In 2023, the UAE government auctioned bonds worth Dh7,700 million over seven tranches – Dh1,100 million per tranche. Of these, Treasury bonds accounted for Dh2,200 million, while T-Sukuks accounted for Dh5,500 million.
What are Treasury bonds and T-Sukuks?
The aim of T-bonds, issued by the UAE government in dirhams, is to construct the UAE yield curve, pivotal as a benchmark and reference index for federal financing endeavors. This includes shaping long-term mortgage rates and steering capital projects. This curve displays bond interest rates across diverse maturity periods, offering insights into anticipated returns on invested capital across varying investment durations.
The bond issuance helps diversify funding sources and minimises dependency on the foreign capital markets. It also provides local investors with an opportunity to invest in local government securities.
T-Sukuks, meanwhile, are Islamic Shariah-compliant financial instruments. They support the establishment of a Sukuk capital market in local currency and help tap the growing global Sukuk market.
Federal bonds are fixed-income investment securities. Purchasing bonds means lending the federal government (bond issuer) an agreed amount of money for a specific period of time. In return, the investor (bondholder) receives interest payments from the government at regular intervals, known as the ‘coupon’. Upon maturity, the bond’s principal amount is paid to the bondholder in full.
