UAE begins selling first federal government dollar bonds


General view of Abu Dhabi, United Arab Emirates, January 3, 2019. REUTERS / Hamad I Mohammed / File Photo

DUBAI, Oct.6 (Reuters) – The United Arab Emirates on Wednesday began trading a three-tranche US dollar-denominated bond, the first issued by the federal government rather than individual emirates, in a sale that is to be be entered into on the same day, according to a document shown.

The bonds have 10, 20 and 40 year tranches. 10-year bonds were offered with an initial price stance of around 105 basis points (bps) versus US Treasuries, 20-year bonds around 135 bps versus the same benchmark. and 40-year bonds at around 3.6%.

The 40-year portion will consist of Formosa Bonds, which are debt securities sold in Taiwan by foreign borrowers and denominated in currencies other than the Taiwan dollar.

The UAE’s finance ministry is expected to raise between $ 3 billion and $ 3.5 billion, two sources familiar with the matter told Reuters. Read more

The federal government has never issued bonds before, but several of the seven emirates it comprises have them, including the capital Abu Dhabi and the Dubai Mall.

“Price reflections are about 40 basis points wider than the extrapolated Abu Dhabi sovereign curve,” a bond strategist said.

“They will probably land around 10 basis points wider than Abu Dhabi. Given that this is a start, I expect there will be a new issue premium.”

Moody’s gave UAE bonds an Aa2 rating in line with Abu Dhabi’s, “backed by the supposed full support of the Abu Dhabi government and its strong balance sheet.”

Fitch Ratings has rated the United Arab Emirates AA- (minus), reflecting “the likelihood of Abu Dhabi (AA / Stable) support when needed”.

The proceeds will be used to finance cabinet-approved infrastructure projects and support investments by the Emirates Investment Authority, the UAE’s only federal sovereign wealth fund.

Reporting by Davide Barbuscia and Yousef Saba; Editing by Clarence Fernandez and Kim Coghill

Our standards: Thomson Reuters Trust Principles.

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