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Egypt’s Dollar Bonds Rise as Post-Mubarak Parliament Convenes

Egypt’s dollar bonds rose, sending yields to almost six-week lows, and the nation’s default risk fell as the first elected parliament since the ouster of President Hosni Mubarak convened for the first time today.

The yield on North African country’s 5.75 percent notes due April 2020 declined two basis points, or 0.02 percentage point, to 7.73 percent at 3:21 p.m. in Cairo, according to prices compiled by Bloomberg. On Egypt’s 6.875 percent bonds due April 2040, the yield retreated seven basis points to 8.40 percent. That takes both rates to the lowest on a closing basis since Dec. 13. The cost of insuring the nation’s debt against default for five years also dropped to a six-week low.

Islamists led by the Muslim Brotherhood’s Freedom & Justice party, who secured about two-thirds of parliamentary seats in elections that ended last week, took their oaths at the assembly’s inaugural session. The Brotherhood had no representation in the previous parliament, which was controlled by Mubarak’s now-dissolved National Democratic Party.

“With parliament convening, they have to make progress on the economy and some investors are taking comfort in that,” Angus Blair, chairman of Cairo-based think tank Signet Institute, said by phone today. “Decisions will probably have to be made in the next month by parliament on the IMF. They have to step up to boost confidence to make some tough decisions.”

Reserves Tumble

Egypt submitted a formal request to the International Monetary Fund on Jan. 16 for a $3.2 billion loan it seeks to help implement an 18-month economic reform program. The ruling military council, which took interim power from Mubarak after he was deposed last February, had turned down a deal for a similar debt package from the Washington-basd fund last June.

Since then, foreign reserves have dropped 32 percent and yields on all treasury-bill maturities rose to records because of rising pressure on funding at local banks and continued political instability.

Five-year credit default swaps for the Arab country declined eight basis points to 577 today, the lowest since Dec. 12, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

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