DUBAI, Feb 23 (Reuters): Dubai's move to sell US$10 billion in bonds to the United Arab Emirates (UAE) central bank alleviated worries it could default as investors bet the state would step in again to help the former boom town weather the downturn.

Dubai stocks jumped almost 8.0 per cent Monday and the cost of insuring its debt fell sharply off peaks earlier this month that saw credit default swaps (CDS) for some Dubai-linked firms soar to levels exceeding those of crisis-hit Iceland.

Moody's Investors Service, meanwhile, said the move could bode well for its credit ratings of some Dubai companies.

"The UAE is making clear it is able and willing to provide support as and when it is needed," said Simon Williams, regional economist at HSBC.

"Dubai's economy will still slow sharply this year. Credit markets will remain tight and export markets are weak but this is a crucial step to put a floor under the near-term downturn."