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Egypt sells LE6 billion in treasury bills

Yields slip but are likely to stay near recent highs given political tensions and limited number of buyers

Reuters, Thursday 13 Oct 2011
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Yields edged lower at a LE6 billion (US$1.005 billion) Egyptian treasury bill auction on Thursday but traders said rates were likely to stay close to recent highs because of political tensions and the small number of buyers.

Yields might have fallen further, dealers said, but clashes between troops and Coptic Christian protesters in Cairo at the start of the week had frightened investors.

The central bank sold LE2.5 billion of 182-day bills for the Ministry of Finance at an average yield of 13.096 per cent, down from 13.144 per cent at Tuesday's auction, the ministry said.

It also sold LE3.5 billion of 364-day bills at an average yield of 13.72 per cent, down from 13.863 per cent at the last issue on 4 October.

"Recent political events may have ensured that rates did not fall by even more," said one dealer in Cairo.

The dealer also cited a lack of competition in the market for Egyptian treasury bills, dominated now by local banks that are loath to expose more of their balance sheets to government debt, whatever the yields.

"I expect rates to stay near these levels," said the dealer, who asked not to be named. "I don't see foreigners coming back in before we get a clear vision on the elections and the make-up of parliament and a timetable for the transfer of power to civil authorities."

Finance Minister Hazem el-Beblawi is trying to secure help from Gulf Arab states to finance a budget that has soared since a popular uprising unseated Egypt's president.

Beblawi resigned this week over the violence in the capital but the ruling military generals rejected his resignation and he returned to work on Wednesday.

"The minister has in fact played a pivotal role in accelerating discussions with neighbouring GCC countries for a financial support package that would alleviate supply pressure in the T-bill market after yields reached 13.8 per cent in recent weeks," said J.P. Morgan economist Brahim Razgallah.

"This will also shore up FX reserves which recently decreased below 5 months of imports," he added.

The Finance Ministry is due to offer LE1.5 billion of three-year bonds at an auction on 17 October.

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