Bloomberg News

Egypt Accepts Most Repos in Four Weeks After Local Yields Surge

January 24, 2012

Jan. 24 (Bloomberg) -- Egypt sold 20 billion Egyptian pounds ($3.3 billion) in seven-day repurchase agreements today, the most this year, after funding pressure at local banks drove domestic debt yields to records.

The North African country’s central bank received bids valued at 22 billion pounds compared with 12.6 billion pounds last week, according to its data on Bloomberg. The agreements allow government security holders to sell them back to the regulator to access funds at a rate of 9.75 percent.

Yields on pound-denominated treasury bills have continued to climb even as Egypt’s interim government requested a $3.2 billion loan from the International Monetary Fund to help support an 18-month economic plan. Local banks borrowed about 138 billion pounds through repo contracts last quarter, about double the amount in the previous three months, as they raised holdings of government debt in the absence of foreign investors.

“There’s a very clear liquidity squeeze and the repo auctions give the central bank a money-injection tool,” said Moustafa Assal, head of fixed income at Cairo-based Beltone Financial.

New parliament members elected a candidate of the Muslim Brotherhood’s party as speaker yesterday in the chamber’s first session since the ouster of former President Hosni Mubarak. Presidential elections are due to be held in mid-June, according to a timeline set by the ruling military council.

T-Bill Yields

The Finance Ministry paid an average yield of 15.802 percent at an auction of nine-month treasury bills on Jan. 22, the highest level since Bloomberg started tracking the data in 2006. The yield on one-year notes was also at a record 15.774 percent at a sale last week. Yields on Egypt’s dollar bonds and its default risk have dropped to the lowest levels in six weeks since the start of IMF debt talks.

The yield on the 5.75 percent dollar bonds due April 2020 fell for the eighth time in nine days, dropping 24 basis points, or 0.24 of a percentage point, to 7.47 percent at 3:15 p.m. in Cairo, according to prices compiled by Bloomberg.

Five-year credit default swaps advanced three basis points to 580, still near the lowest since Dec. 12, according to CMA. The data provider is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

--Editors: Claudia Maedler, Shaji Mathew

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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