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Yields drop at Egypt auction of 5-yr, 7-yr bonds

Excess liquidity as well as expectations of an IMF loan soon drives rates down in the latest treasury bonds auction

Reuters, Monday 15 Oct 2012
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Average yields of Egyptian treasury bonds fell at an auction on Monday as banks with excess liquidity sought to lock in rates on the expectation they will fall if the government seals an IMF loan.

The average yield on five-year bonds worth LE1.5 billion ($245.98 million) fell to 14.83 per cent from 15.143 per cent at an auction on 1 October.

The average yield on seven-year bonds worth LE1 billion dipped to 15.38 per cent on Monday from 15.573 per cent at the earlier auction.

Yields have been declining since the government, which took office in July, steppped up efforts to secure $4.8 billion from the International Monetary Fund. A meeting to discuss the loan is due to take place by the end of this month.

The loan is seen as vital to help Egypt avoid a balance of payments and budget crisis. Foreign donors have promised help to prop up the Egyptian economy in the meantime.

"The yields declined today because of the excess liquidity in the market ... and another reason is the expectation of funds from the IMF, Turkey and Gulf countries," one trader said.

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