Abu Dhabi, capital of the United Arab Emirates, on Tuesday mandated banks for a three-part U.S. dollar-denominated bond issue, its first since 2021, with demand expected to be strong for high investment grade credits from the Gulf.

The emirate plans to sell the benchmark-sized bonds in tranches of 5-, 10- and 30-years, fixed income news service IFR reported earlier.

Benchmark-sized is typically understood to mean at least $500 million.

Early price guidance for the 5- and 10-year portions was given at around 70 and 85 basis points (bps) over U.S. Treasuries, respectively, while guidance for the 30-year tranche was placed at around 125 bps over UST.

Order books were over $15 billion at 0915 GMT, IFR reported, signalling healthy demand.

Abu Dhabi, which holds more than 90% of the UAE's oil reserves, had $37.8 billion in outstanding bonds as of Dec. 31 2023 and $6.8 billion in loans from local banks, according to an investor presentation seen by Reuters.

Government debt as a percentage of nominal GDP stood at an estimated 15.7% at the end of 2023.

Justin Alexander, director at Khalij Economics, said the latest debt sale was unlikely to reflect a need for domestic financing, given Abu Dhabi's strong fiscal position, although a $3 billion bond matures in September.

"More likely this is about staying connected to the bond market after a three-year absence," Alexander, also Gulf analyst at GlobalSource Partners, said, adding it could also provide indirect financing for external investments by the emirate's sovereign wealth funds such as ADQ.

Government-related entities had $113 billion in borrowings at the end of last year, the investor presentation said.

Abu Dhabi last tapped debt markets with a $2 billion, 7-year bond in May 2021 followed by a further $3 billion two-part issue in September.

Like other oil exporters in the region, it has accelerated efforts to diversify non-oil sectors such as tourism, logistics, manufacturing and industry, as part of a transition strategy to secure future economic growth.

Abu Dhabi Commercial Bank, Citigroup Global Markets Limited, First Abu Dhabi Bank, HSBC, J.P. Morgan Securities, Morgan Stanley & Co. International, and Standard Chartered Bank are mandated joint lead managers on the bond issue.

The emirate is rated "Aa2" by Moody's and "AA" by both S&P and Fitch Ratings. (Additional reporting by Federico Maccioni in Dubai and Mohammad Edrees in Bengaluru; Editing by Louise Heavens, Kim Coghill and Barbara Lewis)