BLBG:Egypt Dollar Bonds Fall as Tantawi Promises Dismissed as ‘Step Backward’
Egypt’s benchmark dollar bonds slumped, sending the yield to the highest level since January, after concessions made by the country’s military rulers were rejected by protesters demanding a civilian government.
The yield on the government’s 5.75 percent bonds due 2020 climbed 12 basis points, or 0.12 percentage point, to 6.99 percent at 12:04 p.m. in Cairo. The yield soared 73 basis points in the previous two days. The cost of protecting the nation’s debt against default for five years rose 17 basis points to 562 today, the highest level since March 2009.
The head of Egypt’s ruling military council, Field Marshal Mohammed Hussein Tantawi, said in a televised speech yesterday he had accepted the resignation of the Cabinet and that presidential elections would be held by the end of June. Tens of thousands of demonstrators in Tahrir Square chanted “go, go,” after the address, echoing the reaction to concessions made by former President Hosni Mubarak before he was ousted in February.
“Clearly this is a step backward in terms of achieving political stability,” said Antoon De Klerk, a London-based economist who helps manage $5 billion in emerging-market debt at Investec Asset Management. The government is unlikely to be able to obtain help from the International Monetary Fund given the political crisis, he said.
Seven-Year Low
Twelve-month non-deliverable pound forwards, or contracts that provide guidance to expectations over a set period, weakened as much as 2.5 percent to 7.2 per dollar, the weakest level since February. The pound fell less than 0.1 percent to 5.9965 per dollar, the lowest level on a closing basis in almost seven years.
Deputy Prime Minister Hazem El Beblawi had said in a Nov. 18 interview that Egypt may ask the IMF for the $3 billion loan it rejected earlier this year as domestic borrowing costs soar. Egypt’s economy grew 1.8 percent in the fiscal year that ended on June 30, its weakest performance in at least a decade.
The benchmark EGX 30 Index (EGX30) rose for the first time in 11 days, gaining 0.6 percent to 3,698.84. The measure’s 10 percent drop this week brought the slump for the year to 48 percent, making it the world’s third-worst performer after Cyprus and Greece.
“We’ve seen 10 red sessions so buyers today are seeing some good opportunities despite the uncertainty about the elections,” said Teymour El-Derini, head of Middle East sales at Cairo-based Naeem Brokerage. “We expect further declines in the near term until there’s more visibility because nothing has changed on the ground.”
Deadly Clashes
Clashes in Cairo, Alexandria, Suez and other cities have left at least 30 people dead in the past week, marking some of the most pronounced violence since Egypt’s uprising early this year against Mubarak. The new confrontations threaten to disrupt parliamentary elections due to start next week. Tantawi said the vote would be held on time.
“We don’t accept these decisions,” Ahmed Abd Allah, the public awareness and training officer for the activist group April 6 Youth Movement, said in an interview outside the group’s tent in Cairo’s Tahrir square after Tantawi’s speech. “We refuse to negotiate with the council. They must leave the political scene immediately in order to avoid further escalation.”
The Market Vectors Egypt Index ETF (EGPT) lost 4.9 percent to $9.83 in the U.S. yesterday, the lowest since the fund’s inception in February 2010.
To contact the reporter on this story: Ahmed A Namatalla in Cairo at anamatalla@bloomberg.net
To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net
