Demand for Egypt's sovereign USD bonds rises in July

Ahram Online , Wednesday 5 Jul 2023

Egypt's sovereign US-dollar-denominated bonds experienced a slight increase in their returns on international markets, rising by over 1 cent, due to growing demand for bonds from frontier markets like Pakistan and Ghana, as reported from Tradeweb via Reuters.

An employee counts U.S. dollars in a foreign exchange office in central Cairo, Egypt. AFP
An employee counts U.S. dollars in a foreign exchange office in central Cairo, Egypt. AFP


The surge in investor appetite for Pakistani bonds can be attributed to the recent agreement between the country and the International Monetary Fund (IMF) for a $3 billion loan.

Similarly, the Egypt Sovereign Bond Index, issued by Standard and Poor's (S&P), has seen a modest increase of 0.31 percent since the start of July. However, it still remains nearly 17.1 percent lower than its levels on December 31, 2022.

 S&P data also reveals that Egypt's bonds index witnessed a significant improvement at the end of 2022 following the finalization of a deal with the IMF for a $3 billion loan. 

However, the index later took a downturn due to negotiations between the fund and the Egyptian government under the first review of the country's economic reform program. The first review of Egypt's IMF loan has not yet been conducted, with two scheduled dates in March and June already missed, as Egypt has not fulfilled its commitments stipulated by the review.

Egypt faced significant outflows of around $22 billion following the outbreak of the Ukrainian war, which triggered global inflation and led the US Federal Reserve and international central banks to raise interest rates. These factors contributed to making Egyptian debt instruments less appealing to investors.

Egypt is currently classified as an emerging market by MSCI, a category for countries in the process of becoming developed economies. Frontier markets, on the other hand, represent the developing world's less advanced economies.

*Performance of Egypt's dollar bonds over the last three years. S&P.

Short link: