UAE Introduces Landmark Seven-Year Islamic Treasury Sukuk
The United Arab Emirates has made a significant stride in its financial markets by launching the first-ever seven-year Islamic Treasury Sukuk, setting a new benchmark for the longest maturity under this programme. This innovative tranche, valued at AED550 million, has garnered overwhelming investor interest, with bids soaring to nearly six times its value, highlighting robust confidence in the nation's Islamic finance framework.
Strategic Expansion of the Dirham Yield Curve
Issued by the Ministry of Finance in collaboration with the Central Bank of the UAE as the issuing and payment agent, this dirham-denominated T-Sukuk represents a strategic effort to deepen and extend the UAE dirham yield curve. By introducing longer tenors, the programme aims to provide secure, long-term investment benchmarks within the domestic debt market, fostering greater stability and growth opportunities.
Overwhelming Investor Appetite and Auction Success
The seven-year tranche attracted approximately AED3.1 billion in bids, resulting in an oversubscription ratio of around six times. This strong demand underscores sustained investor confidence in the resilience of the UAE's economy and the strength of its Islamic finance sector. The February auction, which included this tranche, achieved a total issuance of AED1.1 billion under the Islamic Treasury Sukuk Programme for 2026, with overall bids reaching AED5.88 billion and an oversubscription of 5.3 times.
Participation from eight primary dealers spanned two maturities: one maturing in May 2030 and the other in February 2033. The auction secured competitive, market-driven pricing, with yields to maturity at 3.53 percent for the May 2030 tranche and 3.779 percent for the February 2033 tranche. Notably, the February 2033 tranche was priced below par compared to similar US Treasuries at issuance, reflecting favourable market conditions.
Enhancing Market Liquidity and Accessibility
Listed on Nasdaq Dubai under the UAE Treasury Islamic Sukuk Programme, these Sukuk enhance investor access and support liquidity in the secondary market. This listing not only broadens the investor base but also contributes to the overall development of the UAE's capital markets by providing transparent and tradable instruments.
Boosting Economic Sustainability and Growth
Beyond immediate fundraising goals, the Islamic T-Sukuk programme plays a pivotal role in strengthening the local debt capital market. It supports the UAE's long-term economic sustainability and growth ambitions by offering diversified investment options, contributing to a more robust investment landscape, and reinforcing the maturity of the country's Islamic finance ecosystem.
With the successful launch of this seven-year tranche and the strong auction performance, the UAE signals continued progress in expanding its financial infrastructure, paving the way for future innovations in Islamic finance and debt instruments.
