Egypt treasury bills yields jump at weak auction

Reuters, Thursday 24 Nov 2011

Surge driven by a debt market close to saturation and downgrade of country's credit rating by Standard & Poor's

Yields on domestic Egyptian treasury bills surged at auction on Thursday, driven higher by a debt market close to saturation and a credit rating downgrade as the central bank sold less than it hoped.

Egypt's finance minister said last month local banks had nearly reached the maximum they could lend to cover a budget deficit inflated by higher spending in the wake of political turmoil early this year.

The average yield on 182-day T-bills jumped to 14.648 per cent from 13.978 per cent at last week's auction. The central bank sold only 1 billion Egyptian pounds (US$166.6 million) of the bills, less than the LE2 billion it had asked for, the finance ministry said on its website.

The yield on 350-day T-bills rose to 14.932 per cent from 13.882 per cent at the last issue on 27 September. The bank sold only LE1.17 billion of the bills instead of the LE3.5 billion it had offered.

Earlier on Thursday Standard & Poor's cut its foreign and local currency rating on Egypt to B+ from BB-, saying the political and economic outlook had deteriorated following a renewed outbreak of violence that has killed 39 people in five days.

After the uprising in early 2011, 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.

The central bank sells T-bills on behalf of the Finance Ministry.

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