The Central Bank of the UAE (CBUAE) has unveiled a new securities issuance program named Monetary Bills (M-bills) for licensed financial institutions and eligible investors.
These securities will be auctioned and traded through Bloomberg’s primary and secondary market solutions and settled through a local platform designed and operated by Euroclear Bank, consistent with international standards.
The new issuance program aims to provide a comprehensive approach to the management of liquidity within the banking sector of the UAE. The launch of M-Bills to replace the existing conventional certificates of deposit (CD) program is another main milestone in the implementation of the new dirham monetary framework announced earlier this year.
CBUAE will use Bloomberg AIM for the order management processes of market operations. The issuance of M-Bills will be through a transparent auction process conducted regularly.
In addition to the auctioning and tradability of the M-Bills through the Bloomberg Bond Auction and E-Bond systems, the development of an innovative Euroclearable domestic platform would promote broader access to the M-Bills market for eligible investors in a more stable, effective, and structured manner. It will also enable market participants in the UAE to maintain a transparent, single, robust pool of Dirham liquidity.
CBUAE aims to facilitate the growth of a secondary market for securities denominated in UAE Dirham with the launch of the M-Bills program, thereby contributing to the creation of a risk-free pricing benchmark (yield curve) that could stimulate further domestic market activities.
The CBUAE, therefore, expects that the development of such a Dirham liquidity pool would lead to higher M-Bill trading volumes and potentially help reduce the overall volatility of borrowing costs and stabilize returns on the domestic money and capital markets.
“The launch of the M-Bills program provides us with the opportunity to establish robust infrastructure required not only to manage liquidity but also to provide a stable collateralized source of funds to banks and financial institutions operating in the UAE. We are confident that the set-up of such infrastructure will also assist in the development of a Dirham local market for securities issued by the public sector in the UAE in the future. We, at the CBUAE, are pleased with the positive outcome of our partnership with Euroclear Bank and Bloomberg in this regard.”
Stephan Pouyat, Global Head of Capital Markets and Funds Services at Euroclear said, “As a result of our collaboration with the Central Bank of the UAE and Bloomberg, we have together been able to achieve a market first offering. This solution is an efficient, end-to-end local solution that will bring value and opportunities to local investors.”
Nicholas Bean, Global Head of Electronic Trading Solutions at Bloomberg said, “E-Bond and our Bond Auction System are part of a range of Bloomberg solutions designed to help bring more transparency to regional markets. It provides the solutions and technical infrastructure that help bring greater liquidity and efficiency to capital markets. We are delighted by this collaboration with the Central Bank of the UAE and Euroclear to support the bond markets in the UAE.”