Abu Dhabi raises $5b from eurobond market after 3-yr hiatus

Abu Dhabi has entered the eurobond market for the first time since 2021, raising a substantial $5 billion in what stands as one of this year’s most significant transactions from emerging markets, Bloomberg reported on Wednesday.

The capital of the United Arab Emirates, known for its oil wealth, offered bonds in tranches spanning five, 10, and 30 years. Market reception was notably positive, with final yields coming in tighter than initial guidance, indicating robust investor demand.

In 2024, emerging market governments globally have collectively issued nearly $100 billion in dollar- and euro-denominated bonds, marking a potentially record-breaking year, as per data compiled by Bloomberg.

Changes in global interest-rate forecasts, particularly a reduced expectation for rate cuts by the US Federal Reserve amid concerns about inflation, have driven up borrowing costs for dollar-denominated issuers.

However, Abu Dhabi enjoys a solid AA rating from S&P Global Ratings, on par with countries like the UK, France, and Qatar. This rating strength has enabled Abu Dhabi to access the market with minimal impact on its borrowing costs.

The bond offering included a five-year tranche of $1.75 billion, priced at a spread of 35 basis points over US Treasuries, yielding 4.97 per cent, significantly tighter than the initial guidance of 70 basis points. Meanwhile, the longest tranche, also $1.75 billion, carried a spread of 90 basis points and yielded 5.62 per cent.

Despite Abu Dhabi’s strong fiscal position, Mehdi Popotte, a senior portfolio manager at Arqaam Capital, noted that the issuance serves to bolster the emirate’s presence in the market. He anticipates that it will pave the way for further bond issuances by Abu Dhabi’s government-related entities later in the year.

The bond sale was managed by Abu Dhabi Commercial Bank PJSC, Citigroup Inc., First Abu Dhabi Bank PJSC, HSBC Holdings Plc, JPMorgan Chase & Co., Morgan Stanley, and Standard Chartered Plc.