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Egypt Sells Record 1-Year Debt as Aid Pledges Boost Confidence

Egypt sold the most one-year treasury bills on record, exceeding its target by 50 percent, as investors bet the country will secure enough external financing to avoid a currency devaluation.

The Finance Ministry raised 6 billion pounds ($984 million) at an auction of the one-year securities today, two billion more than it sought, according to central bank data on Bloomberg. That’s the biggest issuance since Bloomberg started tracking the sales in 2006. The ministry also exceeded its six-month bill sale target by 36 percent, selling 3.4 billion pounds.

Aid pledges by Qatar and Turkey, as well the government’s plan to conclude an $4.8 billion International Monetary Fund loan agreement before the end of the year, have reignited demand from foreign investors, who dumped local-currency debt after last year’s uprising. Foreigners bought “10 percent or more” of bonds auctioned on Sept. 23, Nidal Assr, head of the central bank’s foreign-exchange management unit, said the following day.

Today’s auction “reflects the increased confidence in Egypt with a stronger outlook for IMF support and positive political development, which reduces fears of a sharp devaluation in the Egyptian pound,” Monica Malik, Dubai-based chief economist at EFG-Hermes Holding SAE, said by phone. “The auction results were likely helped by an increase in foreign flows back into the T-bill market.”

‘More Positive Lens’

The government’s borrowing costs have tumbled this month after Prime Minister Hisham Qandil said Egypt had no current plans to devalue the currency, which is subject to a managed float. The average yield on one-year notes fell 22 basis points, or 0.22 percentage point, to a one-year low of 13.588 percent, central bank data show. It plunged 120 basis points in the previous sale. The average yield on the six-month securities dropped 11 basis points to 13.059 percent, the lowest since last October.

The pound was little changed at 6.0958 a dollar as of 3:53 p.m. in Cairo. It has weakened 4.6 percent since last year’s revolt ousted President Hosni Mubarak, outperforming Turkey’s lira, India’s rupee and Brazil’s real.

“I have not made any decision about going back in yet but we are certainly looking at it through a more positive lens,” Richard Odumodu, London-based head of fixed income at Silk Invest Ltd., said by phone. “We have become more constructive about what’s going on in Egypt in terms of clear support from various bilateral parties, particularly from the Gulf.”

Egypt’s 5.75 percent dollar bonds maturing in April 2020 climbed for a fourth day today, gaining three basis points to 5.81 percent, according to data compiled by Bloomberg.

To contact the reporter on this story: Alaa Shahine in Dubai at asalha@bloomberg.net

To contact the editors responsible for this story: Claudia Maedler at cmaedler@bloomberg.net; Andrew J. Barden at barden@bloomberg.net

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