The government of Dubai has completed a $1.25bn sukuk (Islamic bond) issue split between a $750m 10-year bond priced at 3.875 per cent and a $500m 30-year bond that pays 5.375 per cent.

Bankers say the deal was well-received by the market and capitalised on the demand from investors for Islamic bonds. One bond analyst in the UK said the Dubai issue attracted over $9bn of orders. “The press has been full of reports that Dubai’s economy is coming back strongly and there is so much liquidity hungry for yield,” he added. “Still there is a question mark over the maturities due in 2014.”

Andrew Main, managing partner of UK-based Stratton Street Capital says the deal “found plenty of potential buyers who have easily absorbed the issue not only in the Middle East, but around the world. The pricing really reflects how far Dubai has come in a year.”

It is the first time that the emirate has tapped the bond markets since April last year when it raised $650m in a 10-year deal that paid 6.45 per cent.

The UK’s HSBC, Standard Chartered, and the local Emirates NBD, Dubai Islamic Bank and National Bank of Abu Dhabi were appointed to arrange the deal.