Sixfold Demand for UAE's First 7-Year Islamic Treasury Sukuk

UAE Issues First 7-Year Islamic Treasury Sukuk With Sixfold Demand Surge

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UAE's first 7-year Treasury Sukuk draws heavy demand - implications for portfolios and pricing.

The UAE Ministry of Finance issued its first 7-year Islamic Treasury Sukuk (T-Sukuk) tranche, with a nominal value of AED 550 million (approximately USD 150 million).
The tranche attracted bids of around AED 3.1 billion - a subscription ratio of nearly six times the amount on offer.
The full February 2026 auction raised AED 1.1 billion across three maturities, drawing total bids of AED 5.88 billion, an oversubscription ratio of approximately 5.3 times.
The 7-year issuance is the longest tenor under the federal T-Sukuk programme to date, extending the UAE dirham yield curve and creating a new medium-to-long-term benchmark.
The sukuk are listed on Nasdaq Dubai, enhancing secondary-market access for regional and international investors.
Retail access to T-Sukuk remains available through Abu Dhabi Islamic Bank, Emirates NBD and Emirates Islamic Bank, with a minimum investment of around AED 4,000.

UAE Dirham Yield Curve Reaches New Milestone Under 2026 Islamic Finance Strategy

The UAE Ministry of Finance has issued the country's first 7-year Islamic Treasury Sukuk (T-Sukuk) tranche, marking a key milestone in the development of UAE Islamic capital markets. The AED 550 million tranche forms part of the Islamic Treasury Sukuk Programme for 2026, which is designed to extend and deepen the dirham-denominated yield curve. Investor demand was exceptional, with bids totalling nearly six times the amount on offer.

The Central Bank of the UAE (CBUAE) acted as issuing and payment agent for the February 2026 auction, continuing its established role under the federal T-Sukuk framework. The sukuk are listed on Nasdaq Dubai under the UAE Treasury Islamic Sukuk Programme, widening secondary-market access for both regional and international investors. This listing supports liquidity, improves price discovery and broadens the investor base beyond domestic buy-and-hold institutions.

Auction Results: Near-Sixfold Oversubscription

The February 2026 T-Sukuk auction raised AED 1.1 billion across three maturities, with the new 7-year tranche accounting for AED 550 million of the total. Bids for the 7-year tranche alone reached approximately AED 3.1 billion - a subscription ratio of nearly six times the amount available. Across all three tranches, total bids came to AED 5.88 billion, equating to an overall oversubscription ratio of approximately 5.3 times.

Eight primary dealers participated in the auction, and the Ministry of Finance highlighted their strong involvement as evidence of confidence in the UAE's credit profile and the auction mechanism. The 7-year tranche attracted a disproportionate share of total bids, reflecting clear institutional appetite for longer-duration, Sharia-compliant dirham instruments at sovereign credit quality. According to Gulf News and Arab News, this result signals a meaningful shift in demand toward the longer end of the government sukuk curve.

Yields and Pricing Across the Curve

Yields to maturity across the February tranches were reported at around 3.53% for the May 2030 maturity and 3.779% for the February 2033 tranche. Market commentary noted that the longer-dated tranches were priced below par relative to comparable US Treasuries at the time of issuance. The Ministry described this as reflecting favourable funding conditions for the federal government and solid relative-value positioning for institutional investors.

Although a separate yield for the AED 550 million 7-year tranche was not always disclosed individually, overall auction results pointed to competitive pricing across the curve. The outcome was attributed to the depth of primary dealer participation and broad institutional demand for high-quality, Sharia-compliant paper at medium-to-long maturities in dirhams.

Building Out the Dirham Fixed Income Benchmark

The debut 7-year T-Sukuk represents the longest tenor issued under the federal Islamic Treasury Sukuk Programme to date. By adding a 7-year reference point to the dirham curve, the Ministry creates a clearer benchmark for pricing corporate sukuk, bank balance sheet products and project finance structures in dirhams. According to Zawya and WAM, this forms part of a strategic objective to improve pricing efficiency and support the long-term development of the domestic Islamic debt capital market.

The national Islamic finance strategy targets AED 660 billion in total sukuk issuances, with global Islamic finance assets projected to exceed USD 10 trillion by 2031. A new Capital Market Authority - established under Federal Decree-Law No. 32 of 2025 and operational from January 2026 - provides additional supervisory oversight for investor protection and market conduct. The T-Sukuk use underlying Murabaha and Ijara structures, with an asset pool based on government-backed Treasury obligations.

Portfolio Implications and Retail Access

For UAE-based investors and asset managers, the 7-year T-Sukuk expands the duration toolkit available in the dirham Islamic fixed income market. Portfolios can now be structured with more precise liability-matching, barbell or ladder duration positions, and longer-term goal-based allocations using sovereign-quality, Sharia-compliant instruments. Potential applications include education planning, retirement savings and intergenerational wealth transfer mandates.

Retail access to T-Sukuk is available through Abu Dhabi Islamic Bank, Emirates NBD and Emirates Islamic Bank, with a minimum investment of approximately AED 4,000 via mobile banking platforms. Indicative yields on retail offerings have been cited at around 3.66%, backed by the UAE government's Aa2/AA sovereign rating. Advisors caution that capital protection applies only at maturity, and that longer maturities carry greater sensitivity to interest rate movements - increasing mark-to-market volatility for investors who may need to sell before the sukuk matures.

What Clients are Asking their Advisors

What is a UAE Islamic Treasury Sukuk and how does it differ from a conventional government bond?

An Islamic Treasury Sukuk (T-Sukuk) is a Sharia-compliant government security that generates returns through asset-based structures - such as Murabaha or Ijara - rather than conventional interest payments. The UAE's T-Sukuk carry Aa2/AA sovereign credit quality and are issued under the federal Islamic Treasury Sukuk Programme. Unlike a standard government bond, the investor's return is tied to an underlying asset or transaction that satisfies Islamic finance principles.

How can retail investors in the UAE access Islamic Treasury Sukuk?

Retail access to T-Sukuk is available through partner banks including Abu Dhabi Islamic Bank, Emirates NBD and Emirates Islamic Bank, with a minimum investment of around AED 4,000 via mobile banking platforms. Indicative yields on retail offerings have been cited at around 3.66%. Capital protection applies only at maturity, so investors should be aware that secondary market values can fall if interest rates rise before the sukuk matures.

How do UAE T-Sukuk yields compare with US Treasuries at similar maturities?

At the February 2026 auction, longer-dated T-Sukuk tranches were priced below par relative to comparable US Treasuries, with the 2033 tranche yielding around 3.779%. Because the dirham is pegged to the US dollar, UAE benchmark rates track US monetary policy closely, keeping the yield spread relatively narrow. Investors seeking Sharia-compliant alternatives to US government securities at similar duration points may find T-Sukuk competitively positioned.

What are the main risks of investing in a 7-year UAE Islamic Treasury Sukuk?

The primary risk for investors who need liquidity before maturity is interest rate sensitivity - 7-year instruments experience larger mark-to-market price swings than shorter-tenor sukuk when benchmark rates move. Capital protection is guaranteed only if the sukuk is held to maturity, and secondary market prices can fall below the purchase price. The Nasdaq Dubai listing provides some tradability in the secondary market, but liquidity may be more limited than in major conventional government bond markets.