Bloomberg News

Egypt 9-Month Yield Drops as Country Pitches Debt to Arabs

September 25, 2011

(Updates with Barclays recommendations in fifth paragraph.)

Sept. 25 (Bloomberg) -- The yield on Egypt’s nine-month treasury bills dropped for the first time in almost six weeks after the country started talks with Persian Gulf governments on the sale of local debt. The yield on three-month notes rose.

The Arab country raised its targeted 6.5 billion Egyptian pounds ($1.1 billion) from the sale of three-month and nine- month securities at an auction today. The average yield on nine- month notes fell one basis point, or 0.01 percentage point, to 13.83 percent from a sale of similar-maturity bills last week. That’s the first decline since a sale on Aug. 15 and comes after the yield surged 86 basis points earlier this month. The rate on three-month notes advanced nine basis points to 13.024 percent.

“The Gulf has traditionally invested in equities, but Egyptian debt may be more appealing now with the decline in the stock market,” said Moustafa Assal, head of fixed-income at Cairo-based Beltone Financial Holding. “The financing needs of the government here are huge, so any decline in yields will be temporary unless other foreign investors return.

Egypt’s government is paying the highest yields in almost three years on local currency debt, which it sells weekly to finance the budget deficit. The average yield on one-year treasury bills climbed six basis points to 13.882 percent, the highest since November 2008, at an auction last week.

‘Profit Taking’

Barclays Capital recommended ‘‘profit taking’’ on three- month treasury bills because of ‘‘uncertainties about the election process and the still challenging economic situation.’’ The balance of risks in the Arab country is ‘‘unfavorable for keeping the trade open,’’ analysts Alia Moubayed, Koon Chow and Andreas Kolbe wrote in a research report. Egypt is scheduled to hold parliamentary elections in November.

Finance Minister Hazem El Beblawi said Sept. 22 the government was in talks with Saudi Arabia and the United Arab Emirates to have them or their investment arms buy T-bills. The plan may lower borrowing costs, National Bank of Egypt Chairman Tarek Amer said.

‘‘It will help,’’ Amer, whose state-owned bank is the country’s biggest by assets, said in an interview yesterday in Washington. Current yields reflect conditions in the market, he said. ‘‘The minister of finance is suffering because of the interest rate bill he’s paying,” said Amer, a former deputy central bank governor.

Egypt’s 5.75 percent 10-year dollar bond due April 2020 slumped on Sept. 23, sending the yield 43 basis points higher to 5.92 percent, the highest level since May 31. The pound was little changed at 5.973 per dollar.

--Editor: Shaji Mathew, Susan Lerner, James Kraus.

To contact the reporters on this story: Alaa Shahine in Dubai at asalha@bloomberg.net; Ahmed A Namatalla in Cairo at anamatalla@bloomberg.net

To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net


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