Abu Dhabi is returning to debt markets with its first dual-tranche international bond issuance since April 2024, as part of its global medium-term note program, Bloomberg reports. The Abu Dhabi government has started marketing the bonds yesterday.

What we know: The issuance will comprise two tranches — both senior unsecured fixed-rate bonds — with tenors of five and 10 years. According to initial price guidance, the Emirati capital is targeting a five-year tranche maturing on 2 October 2028, with a spread of 40 basis points (bps) over US treasuries, while the 10-year tranche, maturing on 2 October 2035, comes with a spread of 55 bps over treasuries, the outlet reports.

Books for the bonds topped USD 10 bn as of yesterday morning, Zawya reports.

The bonds are set to be listed on both the Abu Dhabi Securities Exchange (ADX) and the London Stock Exchange, Asharq Business reports. They are rated AA by S&P Global and Fitch, and Aa2 by Moody’s, all with a stable outlook.

Abu Dhabi maintains a sovereign credit rating of AA, the same level held by the United Kingdom, France, and Qatar. This enhances the emirate's appeal to investors, especially during times of market volatility.

REFRESHER- The issuance marks Abu Dhabi’s first return to the international debt market since April 2024, when the emirate raisedUSD 5 bn through a three-trance eurobond offering, which was hailed as “one of the biggest from emerging markets” at the time. The offering was more than 4x oversubscribed, with investors reportedly submitting bids worth USD 22 bn. Thanks to strong investor demand, the emirate tightened the final yields compared to the initial price guidance.

Does Abu Dhabi need the money? The emirate is expected to achieve fiscal surpluses over the coming few years, with S&P seeing fiscal surpluses in the UAE averaging 3.2% of GDP until 2028. Lower oil prices and higher government spending are projected to lower the surplus to 2% of GDP this year, before averaging 3.8% over 2026-2028, bringing it below the 6.4% average for 2021-2024. The issuance is likely more of a move to strengthen its presence in international debt markets, analysts have previously said, which also help support the position of government-related entities in their debt-raising efforts.

Why now? The move comes amid a wave of debt issuances from developing markets, a rush that has not been seen in at least a decade, capitalizing on strong investor appetite for emerging market assets amid what investors describe as sharp volatility in global debt markets, according to Asharq Business.

ADVISORS- The bond sale will be managed by our friends at HSBC, Citigroup, along with First Abu Dhabi Bank, Goldman Sachs, Morgan Stanley, Standard Chartered, who will act as global coordinators, lead managers, and bookrunners. Bank of China, Emirates NBD Capital, JP Morgan, ICBC, Sumitomo Mitsui, and Abu Dhabi Commercial Bank will also act as bookrunners and lead managers.

OTHER DEBT NEWS-

The Central Bank of the UAE’s (CBUAE) AED 1.1 bn T-Sukuk auction in September was 4.6x oversubscribed, attracting AED 5.1 bn in bids, according to Wam and a Finance Ministry statement on X. The offering came in two tranches, with the first priced at a 3.64% yield and set to mature in August 2028. A second offering will mature in May 2030 and has a 3.72% yield. The yields represent a spread of 5 basis points above comparable US Treasuries.

September’s auction follows several oversubscribed auctions so far this year,, with July’s AED 1.1 bn auction nearly 5x oversubscribed, attracting AED 5.4 bn in bids, and June's AED 1.1 bn issuance seeing 5.6x demand. Earlier auctions in May and April were also well covered.

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