Dubai has successfully tapped markets with a sale of US$1.25 billion (Dh4.59bn) of bonds and sukuk that will result in the emirate paying a lower rate to borrow than the Italian government.
This week the emirate sold a $750 million sukuk with a 10-year maturity, with the first issue "extremely oversubscribed", according to arranging banks.
Dubai was also able to raise $500m through a sale of 30-year conventional bonds, after institutional investors asked for a longer dated issuance.
With the local economy recovering, Dubai raised funds at a lower interest rate than Italy, whose 10-year government debt yields 4.1785 per cent.
Dubai's 10-year Islamic bonds were priced with an annual coupon of just 3.875 per cent. When Dubai last tapped bond markets for 10-year funding, it paid a coupon of 5.591 per cent.
"This has now set the stage for other Dubai entities to raise longer-term financing," the Dubai Department of Finance said in a statement.
Last night, Emirates Airline was said to be preparing to follow the Dubai Government back to bond markets, Bloomberg News reported. The carrier was said to be planning a benchmark dollar bond sale, which would typically be worth around $500m.
"The rest of the world is starting to wake up to the cheapness of this particular market," said Mark Watts, the head of fixed income at National Bank of Abu Dhabi.
"The day of the public bond market in this region has actually come, and I think we'll see a lot more issuance."
Dubai's ability to attract 30-year funding - typically sought by pension funds and insurers that do not usually buy Arabian Gulf debt - could bode well for companies seeking to raise funds from debt markets, said Mr Watts.
The speed of the issuance took many investors by surprise, with the issue announced and closed within a single day's business, he added.
The cost of insuring Dubai's debts against default has also fallen sharply.
Dubai's credit default swaps have fallen from a peak of 952.3 basis points in early 2009 to an all-time low of 258.335 basis points earlier this year, meaning that it costs $25,833 to insure $1m of debt.
"The transaction is a resounding success and has set the tone for upcoming issuances from the region," said Salman Ansari, the regional head of debt capital markets for Standard Chartered.
"With a high-quality order book of approximately $15bn and the fact that the Government of Dubai was able to successfully print its first ever 30-year issue, this transaction is testimony of global investor confidence in the Dubai credit story and its long-term value proposition," he said.
ghunter@thenational.ae