Bloomberg News

Egypt Bill Yields Rise as Banks Offer Higher Deposit Rate

November 24, 2011

(Updates with analyst comment in third paragraph.)

Nov. 17 (Bloomberg) -- Egypt sold treasury bills at the highest yields in more than three years and failed to meet a 5.5 billion Egyptian pounds ($919 million) fund-raising target as banks raised deposit rates.

The yield on six-month notes jumped 53 basis points, or 0.53 percentage point, from an auction last week to 13.978 percent, the highest level since October 2008, according to Central Bank of Egypt data on Bloomberg. The rate on one-year bills rose 65 basis points to 14.725 percent, seven basis points less than a peak in September 2008, the highest since Bloomberg began tracking the data in 2006. The government raised 2.98 billion pounds at the auction.

“Interest rates are on the rise across the board, which is a natural consequence of the instability and the decision by local banks to increase their certificate of deposit rates,” said Nasser Abouelseoud, head of fixed income at Bank of Alexandria, the Cairo-based unit of Intesa Sanpaolo SpA. “Banks maybe trying to compensate, and this may force the government to cancel upcoming bond sales as it will not be willing to pay such high rates in the long term.”

Local-currency borrowing costs have risen amid political unrest following the ouster of President Hosni Mubarak in February. Yields continued to increase this quarter as cash levels declined at banks as local lenders increased investments in government securities. Banks raised their holdings of the debt by 37 percent this year, according to central bank data.

Deposit Rates

“Local debt has risen and that’s why we must diversify the sources of borrowing,” Finance Minister Hazem El Beblawi said in a telephone interview today. “There’s a need to think about increasing borrowing from abroad, especially from international institutions.”

Egypt’s 5.75 percent 10-year dollar bond due April 2020 fell for a fourth day, sending the yield six basis points higher to 6.14 percent at 4:48 p.m. in Cairo, the highest level in six months. Twelve-month non-deliverable pound forwards weakened less than 0.1 percent to 6.995 against the dollar, the weakest level since February.

National Bank of Egypt and Banque Misr SAE, which together controlled 39 percent of the country’s banking assets in the fiscal year that ended June 2010, announced in the past month that they would pay investors 2 percentage points more, or 11.5 percent, on three-year, pound-denominated certificates.

--Editors: Shanthy Nambiar, Inal Ersan

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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