Egypt sold $1.53 billion worth of one-year, dollar-denominated treasury bills on Tuesday with a weighted average yield of 3.87 per cent, the Central Bank of Egypt (CBE) has announced.
The CBE had sought to raise $2 billion yesterday in its first dollar-denominated issue this year. Yields on the accepted bids ranged from 2.8 to 3.9 per cent.
Egypt last sold dollar debt in April 2010, paying out 5.75 per cent yields on ten-year Eurobonds.
Cairo-based investment bank Beltone Financial has said it expects the latest move to ease upward pressure on yields for domestic T-bills, which have surged to three-year highs in 2011.
"Banks will realise that there are other options for the government to raise money and finance its deficit," Beltone asserted.
The CBE has been recently tapping into its foreign currency reserves to support the local currency, which fell to below LE6 to the dollar following last week’s violent clashes in downtown Cairo.
Beltone believes the finance ministry will have made the right choice in issuing dollar-denominated bills if pressure on the Egyptian pound eases in the coming year, as it pays much lower yields on this debt than it does on its local currency-denominated counterparts.
However, if the Egyptian pound continues to depreciate and Egypt’s Balance of Payments further deteriorate, pressure on the country’s foreign reserves will intensify when the time comes to repay the debt.