UAE Government Domestic Treasury T-Sukuk Momentum Continues in 2025 with First Auction on 21 January Raising an Aggregate AED1.1bn (USD300mn)
Abu Dhabi – The dirham-denominated Islamic Treasury Sukuk (T-Sukuk) first introduced by the UAE Ministry of Finance (MoF) in collaboration with the Central Bank of the UAE (CBUAE) in 2023 continues to gain traction as sovereign domestic Sukuk issuances to regulate liquidity management and reserve requirements of Islamic financial institutions and the Islamic banking units of conventional banks authorised in the emirate.
The Ministry of Finance (MoF) as the issuer, in collaboration with the Central Bank of the UAE (CBUAE) as the issuing and paying agent, announced the results of the Islamic Treasury Sukuk (T-Sukuk) auction on 21 January 2025 which are part of the Islamic T-Sukuk issuance programme for Q1 2025.
The auction comprised two tranches each of AED550mn (US$149.74mn), thus totalling AED1.1bn (USD299.48mn) per transaction. The auction saw strong demand from the eight primary bank dealers for the tranches maturing on 23 May 2027 and on 26 September 2029. A total of AED6.91bn (USD1.88bn) in bids were received for the two tranches exceeding the subscription volume by 6.3 times.
The success of the auctions is reflected in the competitive market prices achieved, with a yield to maturity (YTM) for the January 2025 transaction of 4.32% for the tranche maturing in May 2027 and 4.43% for the tranche maturing in September 2029, with a spread of 7 and 10 basis points over US Treasury bonds of similar maturities at the time of the auction.
The Islamic T-Sukuk issuance programme, says the CBUAE will contribute to building the UAE dirham denominated yield curve, providing safe investment alternatives for investors, strengthening the local debt capital market, developing the investment environment, as well as supporting sustainable economic growth.
The T-Sukuk structure is based on Murabaha/Ijara assets with the asset pool comprising 54% Ijara assets and 46% Murabaha receivables. The UAE Federal Government Sukuk Programme Ltd is the Trustee and Lessor acting on behalf of the Government of the United Arab Emirates, acting through the Ministry of Finance – the Obligor, Seller, Lessee and Servicing Agent to the transaction.
The Sukuk certificates are listed and traded on the Nasdaq Dubai Main Market and on the Official List of Securities of the Dubai Financial Services Authority (DFSA). All the T Sukuk offerings are issued under the unlimited UAE Treasury Sukuk Programme.
The Sukuk are issued via eight primary dealers, with the UAE Central Bank acting as the issuing and payment agent. To facilitate the smooth implementation of the T-Sukuk initiative, the MoF published a robust Primary Dealers code and onboarded eight banks namely Abu Dhabi Islamic Bank, Dubai Islamic Bank, Abu Dhabi Commercial Bank, Emirates NBD, First Abu Dhabi Bank, HSBC, Mashreq and Standard Chartered as Primary Dealers to participate in the T-Sukuk primary market auction and to actively develop the secondary market.
According to UAE Minister of State for Financial Affairs, Mohamed Bin Hadi Al Hussaini, the introduction of the T Sukuk “reaffirmed the UAE’s keenness to strengthen the Islamic economy and boosts the size of financial alternatives for investors which contributes to developing the UAE’s investment environment.”