Dubai is expected to roll over its $10bn debt owed to Abu Dhabi.

The debt is due to be repaid on 22 February to the UAE central bank, but according to Reuters, a rollover has already been agreed, although the length of the extension has yet to be revealed.

The emirate borrowed the money in 2009 at the height of the financial crisis, following the crash of its property market. The loan prevented the emirate and its government-related entities (GREs) from defaulting on their debt obligations.

The rollover will come as no surprise to the market, which expected the deadline to be extended.

As yet, there are no details on the length of the extension or the pricing, but it is widely expected to be refinanced on improved terms.

“The market assumes the debt will be rolled over with better conditions,” Montasser Khelifi, senior manager of global markets at Dubai-based Quantum Investment Bank, tells MEED.

Investor confidence in Dubai will continue to grow following the rollover of the debt. ”The overall market sentiment is very good,” says Khelifi.

The rollover also illustrates the improving relationship between Abu Dhabi and Dubai.

Often pitted as competitors, there are signs the two emirates are seeking to work closer together. There are discussions taking place around the possible merger of the Abu Dhabi and Dubai exchanges. Last year, the two aluminium companies Abu Dhabi-based Emirates Aluminium (Emal) and Dubai’s Dubai Aluminium (Dubal) merged.

“We are seeing a tightening of relationships and the rollover of this debt is a demonstration of these stronger ties,” says Khelifi.