#UAE’s First Federal Debt Adds to Borrowing Rush Before Fed Taper - Bloomberg

UAE’s First Federal Debt Adds to Borrowing Rush Before Fed Taper - Bloomberg

The United Arab Emirates is marketing the first bond sale in its 50-year history as a combined federation, joining the rush of emerging-market borrowers tapping investors before the Federal Reserve starts winding down its pandemic stimulus.

The securities, which are denominated in dollars, will mature in 10 and 20 years, according to a person familiar with the matter who’s not authorized to speak publicly and asked not to be identified. The UAE is also offering a 40-year dual-listed Formosa bond -- debt issued in Taiwan and denominated in a currency other than the Taiwan dollar. Proceeds from the debt will go toward infrastructure projects and investments by its sovereign wealth fund.

While several of the seven emirates, including Abu Dhabi, Dubai and Sharjah, have tapped the market over the years, the UAE has never done so as a single entity. The debt sale comes after a turbulent week that drove short-term Treasury yields to the highest levels since the pandemic began. As investors start pricing in higher borrowing costs in anticipation of the Fed’s tapering of its asset purchases, emerging-market governments -- both regional and global -- have been rushing to bond markets.

The bonds “are going to be popular with investors given the novelty of this issuance,” said Richard Segal, a research analyst at London-based Ambrosia Capital. Based on actual and implied ratings differentials, a federal UAE bond would trade between Abu Dhabi and Dubai government bonds, but closer to Abu Dhabi, he added.