BLBG:Egypt’s Dollar Bond Yield Rises to Record on Political Risk, IMF
The yield on Egypt’s 10-year dollar bonds rose to a record amid investor concern about political tensions and deteriorating finances.
The rate on the 5.75 percent notes maturing in April 2020 gained 15 basis points, or 0.15 percentage point, to 8.42 percent at 12:14 p.m. in Cairo. The Finance Ministry plans to sell 6.5 billion Egyptian pounds ($1.1 billion) of treasury bills and bonds at auctions today.
Voters in the North African country are scheduled to complete elections for the lower house of parliament in the next two weeks, leading up to the first anniversary of the revolt that ousted former President Hosni Mubarak. An International Monetary Fund mission will visit on Jan. 15 to resume talks on a $3.2 billion loan, Al Ahram newspaper reported yesterday. The government had turned down the funds in June.
“There’s some pessimism in the market about where the country is going,” said Gabriel Sterne, a London-based senior economist at Exotix Holdings Ltd. “Egypt needs a heavy dose of traditional IMF medicine, including reducing budget deficit and cutting fuel subsidies.”
International reserves (EGIRES) declined to $18.1 billion in December from $20.2 billion the previous month. Reserves reached $36 billion in December 2010. “The decline in reserves is a genuinely worrying development over the last two months,” Sterne said.
The government is offering 2 billion pounds of three-month bills and 3.5 billion pounds of nine-month notes at the sale, according to Central Bank of Egypt data on Bloomberg. It is also seeking 1 billion pounds from the sale of seven-year bonds.
Egypt last issued seven-year bonds in October at an average yield of 14.52 percent. Political tensions have lifted the country’s borrowing costs. The average yield on nine-month bills rose to 15.307 percent at the previous sale on Dec. 28, the highest level since Bloomberg started tracking the data in 2006.
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
