UAE’s $1.5bn bond issue oversubscribed five-fold

Wam

• Order book exceeds $7.4bn
• Bond will list in London and Dubai
• UAE business activity stays strong

The order book for the UAE government’s US dollar-denominated $1.5 billion bond issue exceeded $7.4 billion, representing strong demand from domestic, regional and international investors, the finance ministry said in a statement.

The 10-year bond, maturing on September 2033, was issued with a yield of 4.91 percent. This represented a spread of 60 basis points over US Treasuries, the UAE state-run Wam news agency reported.

The bond will be listed on the London Stock Exchange and Nasdaq Dubai.

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“The UAE has yet again achieved strong results in its recent bond offering, attracting strong and diversified investors’ demand,” Mohamed bin Hadi Al Hussaini, minister of state for financial affairs, was quoted as saying.

The demand for the latest UAE bond comes as it was revealed on Monday that the UAE’s revenues rose 31.8 percent in 2022, supporting an overall fiscal surplus last year.

Spending increased by 6.1 percent in 2022 year-on-year to stand at about AED427 billion ($116 billion), according to UAE finance minister Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum.

“Despite the increase in revenues, the UAE has maintained a cautious and rational spending policy,” the minister said.

He added that the surplus will allow for stronger fiscal buffers to mitigate potential financial risks.

Business activity in the country has also remained positive. Dubai’s headline Purchase Managers Index, issued on September 11, stood at 55.0 in August, down from 55.7 in July.

It was the second monthly drop in a row and the lowest recorded figure since February. However, the index remains above the 50.0 mark that separates economic growth from contraction.

David Owen, senior economist at S&P Global Market Intelligence, said: “While the expansion in business activity appears to have reached its peak, it is still running well above trend, boosted by strong new order inflows and robust economic conditions.

“The latest data on business sentiment and hiring adds to these positive findings, suggesting that companies feel there is still considerable scope for expansion in a growing market.”

Forty-five percent of the bonds were allocated to investors from the Middle East, with the rest going to Americans (21 percent), Asians (11 percent), the UK (9 percent) and Europeans (14 percent). 

The bonds will be rated AA- by Fitch and Aa2 by Moody’s, in line with the federal government’s credit rating.