Bloomberg News

Egypt Raises Less Than Half of Funds Sought at T-Bills Sale

June 23, 2011

(Updates with analyst comment in third paragraph, 10-year dollar bond yield in sixth.)

June 23 (Bloomberg) -- Egypt raised less than half of the 7 billion Egyptian pounds ($1.2 billion) it sought at a treasury bill sale today as the average yield on the six-month yield jumped the most in more than a month.

The Arab country’s Ministry of Finance accepted bids for 2 billion pounds in six-month notes out of the 3.5 billion pounds it targeted. The average yield advanced 15 basis points, or 0.15 percentage point, to 12.791 percent compared with an auction of similar maturity bills last week. It sold 1.1 billion pounds of one-year securities at an average yield of 12.982 percent, the highest level since November 2008.

“They’re trying to avoid paying a higher cost for borrowing but that strategy may only be sustainable for another three to six months,” Mohamed El Sadat, deputy head of fixed income at BNP Paribas Egypt, said by telephone. “In the long term the government risks not being able to raise the money it needs from short-maturity sales as their yields will rise as well.”

Egypt has increased its reliance on short-maturity treasury bills since the January uprising that ousted President Hosni Mubarak the following month, forcing the economy to contract in the last quarter and borrowing costs to rise at the weekly auctions. The Finance Ministry has missed its fund-raising target in the last 10 auctions of one-year bills as the yield advanced 254 basis points since the last pre-revolt sale.

Egypt yesterday cut its budget deficit target for the next fiscal year starting July after reducing spending in a revised budget, the Finance Ministry said. The changes will decrease the government’s need to tap foreign lenders to finance the budget deficit, it said. The ministry will target a deficit of 8.6 percent compared with 11 percent in the budget announced June 1.

The yield on the 5.75 percent 10-year dollar bond due in April 2020 fell three basis points to 5.66 percent at 4:33 p.m. in Cairo. The pound dropped 0.1 percent to 5.9706 per dollar.

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


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