The UAE raises $300M through Islamic T-Sukuk, with demand 6.5 times higher than available bonds

The UAE raises $300M through Islamic T-Sukuk, with demand 6.5 times higher than available bonds

The UAE’s Ministry of Finance (MoF) held an auction for Islamic Treasury Sukuk (T-Sukuk) on Wednesday, raising $299.4 million (AED 1.1 billion). This aims to boost the local debt market and support long-term economic growth.

Sukuk Auction

The UAE held an Islamic T-Sukuk auction as part of its issuance program for early 2025, according to the Ministry of Finance (MoF).

There was strong demand from eight main dealers for two types of sukuk, which will mature in August 2028 and September 2029. The total bids reached $1.9 billion (AED 7.1 billion), making the auction 6.5 times oversubscribed.

The return rate (Yield to Maturity) for both sukuk was about 4.2%, just slightly above US Treasury rates.

The MoF said this sukuk program will help establish a UAE dirham-based yield curve. This will provide safe investment options, strengthen the local debt market, and support economic growth.

The auction was organized with the Central Bank of the UAE (CBUAE), which handled the issuing and payments.

UAE’s Debt Market

A recent Fitch report predicts that the UAE’s debt market will grow to $400 billion in the coming years. This growth will be driven by various factors, including new funding sources, upcoming debt repayments, infrastructure projects, and regulatory changes.

Lower US interest rates in 2025 and falling oil prices may further boost the debt market.

In 2024, the UAE was the third-largest issuer of dollar debt in emerging markets and the second-largest in the GCC region.

Fitch also noted that most UAE debt is issued and invested in by banks, which could pose risks. Few companies issue debt in dirhams, making the investor base less diverse.

Sukuk Market Outlook

In 2024, UAE-based entities issued $14.4 billion in sukuk, highlighting the country’s strong role in Islamic finance. The UAE ranked fourth globally among Islamic financial markets by assets.

Despite regional tensions, global sukuk issuance increased by 10% in 2024, reaching $930 billion.

S&P Global Ratings expects the sukuk market to continue growing in 2025, with total Islamic bond issuances between $190 billion and $200 billion. Of this, $70 billion to $80 billion will be in foreign currencies.

The agency noted that interest rates will likely remain low in 2025, making it easier for issuers to raise funds. However, sukuk issuance from non-traditional sources was limited in 2024 and is expected to stay low in 2025.

Published: 27th February 2025

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