Egypt's central bank reduced the size of its treasury bill auction on Sunday as yields surged to their highest level since the 2008 global economic crisis.
It is the latest indication the government may be squeezing the ability of domestic banks to finance the state's mushrooming budget deficit.
The Finance Ministry said the average yield on 266-day T-bills jumped to 14.705 per cent from 13.981 per cent at the last issue on 8 November. This was its highest level since the central bank began issuing bills of that maturity in June 2009.
The central bank sold only LE2 billion (US$334.3 million) of the bills instead of the LE3.5 billion it had asked for.
The average yield on 91-day T-bills shot up to 13.49 per cent, its highest since 30 September, 2008, from 12.781 per cent at last week's auction. The central bank sold LE1.5 billion of that maturity, the same amount it had asked for.
Egypt's finance minister said last month local banks had nearly reached the maximum they could lend to cover the country's budget deficit, which has been inflated by demands for higher spending in the wake of Egypt's uprising early this year.
After the uprising, the government increased subsidies on some goods and agreed to raise the pay of state workers at a time when a collapse in tourism and foreign investment was reducing tax revenue.