UAE launches new auction solution for Islamic bonds in collaboration with Bloomberg and Euroclear Bank

May 10, 2023, Abu Dhabi: The Ministry of Finance (MoF) of the UAE launched a new solution that will enable the MoF, in collaboration with the Central Bank of the UAE (CBUAE), to issue dirham- denominated Islamic Treasury Sukuk (T-Sukuk). The securities will be auctioned through Bloomberg’s primary and secondary market solutions and settled through a local platform, compliant with international standards, built and operated by Euroclear Bank.

This announcement follows on the launch by the CBUAE of a securities issuance program for Monetary Bills, in collaboration with Bloomberg and Euroclear in 2020 (see press release), and the subsequent expansion of the program to Treasury Bonds in 2022 in collaboration with the MoF.

For T-Sukuk, the MoF and CBUAE will utilize Bloomberg AIM, a leading investment and order management solution, to streamline processes for market operations, including custom swift messages to Euroclear Bank for settlement. The issuance will be conducted on the Bloomberg Auction System to connect to the primary dealers selected by the MoF. Trading of the securities will also be facilitated over the Bloomberg E-Bond system, enabling broader access to the secondary market for eligible investors.

The settlement cycle will include primary issuance to secondary market trading through a seamless interfaced platform developed jointly with the Central Bank of UAE, Euroclear Bank, the Brussels-based international central securities depository, and Bloomberg.

The solution provides both the CBUAE and the MoF with a full straight-through processing solution integrated within their systems, including audit trails and automation of the allocation process to dealers, and of coupon and redemption payments. It will also provide greater transparency of secondary market activity, and facilitate broader access to these securities for eligible investors beyond country borders.

His Excellency Mohamed bin Hadi Al Hussaini, Minister of State for Financial Affairs, reaffirmed the UAE’s keenness to strengthen the Islamic economy and build a pioneering investment infrastructure to boost the Islamic economy as one of the key pillars of the national economy.

His Excellency Al Hussaini said: “The Ministry of Finance cooperates with all its partners, foremostly the Central Bank of the UAE, to attract investments and deploy them in Islamic economy channels. The T-Sukuk are Sharia-compliant financial certificates, and they will be traded to reflect the local return on investment, support economic diversification and financial inclusion, as well as contribute to achieving comprehensive and sustainable economic and social development goals.”

Additionally, His Excellency emphasised that issuing the T-Sukuk in local currency will contribute to building a local currency bond market, diversifying financing resources, boosting the local financial and banking sector, as well as providing safe investment alternatives for local and foreign investors. His Excellency also noted that this issuance will help build the UAE Dirham-denominated yield curve, thereby strengthening the local financial markets and developing the investment environment.

Yifat Sauer, Deputy Head of Capital Markets at Euroclear said: “The successful launch of the UAE Ministry of Finance Sukuk on our jointly developed innovative platform is another watershed moment for the UAE capital markets. The diversification of debt through issuing Islamic Treasury Sukuks will reinforce the economy and contribute to a more holistic financial marketplace.”

Giuseppe Netti, Head of Financial Solutions, Middle East, and Africa at Bloomberg said: “We are delighted to continue our collaboration with the Central Bank of the UAE, Euroclear and the Ministry of Finance to support the UAE bond markets. This new Bloomberg offering enables the issuance of Islamic Bonds for central banks across the region and beyond, while providing regulators with greater transparency in the market.”

Leverage agile frameworks to provide a robust synopsis for high level overviews. Iterative approaches to corporate strategy foster collaborative thinking to further the overall value proposition. Organically grow the holistic world view of disruptive innovation via workplace diversity and empowerment.