The government of Dubai has completed a five-year $1.93bn sukuk (Islamic bond) issue, smaller than initial guidance that the sukuk would be $2.5bn.

The deal is between a $1.25bn dollar-denominated tranche, and a AED2.5bn ($680m) dirham tranche. The dollar tranche pays 6.39 per cent and the dirham tranche pays 5.65 per cent. The pricing is equal to about 370 basis points above midswap rate, the mid-point of bids and offers on similar bonds.

By contrast, the $1bn sukuk issued by Tourism Development & Investment Company in early October, the Abu Dhabi-owned developer, was priced at 230 basis points above the midswap rate.

The issue attracted about $6bn worth of offers, but was smaller than the initially expected size of $2.5bn, to keep pricing low.

“This issue shows there is still appetite for Dubai risk even though there are still concerns about Dubai’s debt level,” according to one Dubai-based bond trader.

The government of Dubai has also established a separate $4bn bond programme, although it is not clear when the first issue under this will occur.