Bloomberg News

Egypt T-Bill Yields Drop After Saudi Arabia Pledges Support

October 16, 2011

(Updates with treasury bill sale in second paragraph.)

Oct. 16 (Bloomberg) -- Egyptian treasury bill yields declined at an auction today after Saudi Arabia said it plans to invest $500 million in Egypt’s T-bills and will give the Arab country another $500 million to finance its budget deficit.

The yield on three-month securities sold today fell 18 basis points, or 0.18 percentage point, to 12.431 percent from last week’s auction, the lowest level in more than a month. Egypt’s Finance Ministry sold nine-month notes at an average 13.625 percent from 13.636 percent last week.

Today’s T-bill auction is part of a plan to raise a record 170 billion pounds ($28 billion) this quarter. The country’s borrowing costs have risen to the highest levels in almost three years in the aftermath of the uprising that ousted former President Hosni Mubarak in February. Egyptian Finance Minister Hazem El Beblawi said last month he was in talks to draw investments from Persian Gulf governments to help reduce yields.

Egypt relies on weekly sales of government securities to fund its budget deficit, which is expected to reach 9.9 percent of gross domestic product in the fiscal year that ends in June 2012, according to Cairo-based EFG-Hermes Holding SAE. That compares with 9.5 percent for the year that ended last June.

The yield on Egypt’s 5.75 percent 10-year dollar bond due April 2020 gained one basis point, or 0.01 percentage point, to 5.99 percent on Oct. 14. The pound weakened less than 0.1 percent to 5.9691 per dollar.

Saudi Arabia’s announcement comes after El Beblawi said Qatar provided Egypt with $500 million in budgetary support earlier this month.

--Editors: Digby Lidstone, Andrew Barden.

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

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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