ABU DHABI, The 10-year interest rate swap prices of the UAE Dirham ranged between 3.7 percent and 3.9 percent during of 2018, according to a survey conducted by the Central Bank of United Arab Emirates.

An interest rate swap is a financial derivative which involves the swapping or exchange of interest rates. One counterparty will pay a fixed rate, and the other will pay a floating rate based on a benchmark, such as the LIBOR, EURIBOR, or BBSY. As there is no bond market in dirham denomination in the UAE, the interest rate swaps translate the returns of long-term securities.

The public debt law issued earlier this month, is expected to bolster capital markets while allowing the Federal Government to start issuing sovereign bonds denominated in the local currency, therefore facilitating compliance with liquidity requirements in accordance with Basel III and allow investors to balance risks in more diversified portfolios. Under this law, banks operating in the country will be able to buy government bonds in dirham or foreign currencies, helping them manage their liquidity. Overall, this is in line with the nation’s vision to press ahead with further diversification of the economy, and will underpin the UAE’s position as a growing regional and global financial centre and further improve the UAE’s credit rating.

In more detail, the10-year Interest Rate Swap prices of the UAE Dirham reached 3.5 percent in January, edging up to 3.7 percent in April, and hit 3.9 percent in May before falling back anew to 3.7 percent in June.

Source: Emirates News Agency