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Egypt Sells T-Bonds as It Readies Budget; Dollar Bonds Gain

Egypt raised 3.5 billion Egyptian pounds ($580 million) at an auction of treasury bonds today, exceeding its goal as the government formed a committee to audit the planned budget for next year. Dollar bonds rose.

The Arab country sold its target 2 billion pounds of three-year notes and 1.5 billion pounds of seven-year securities, according to central bank data on Bloomberg. It had sought to raise 1 billion pounds of the latter. The average yield on the three-year debt rose seven basis points, or 0.07 of a percentage point, to 16.23 percent from the last sale on April 30. The rate on the seven-year bonds was unchanged at 16.91 percent.

Spending in next year’s budget is forecast at 538 billion pounds, while revenue is projected at 377 billion pounds, the state-run Al Ahram newspaper reported today, citing an unidentified ministerial official. Egypt is aiming for a budget deficit of between 8.6 percent and 8.8 percent of economic output for next year, Finance Minister Momtaz El-Saieed said last month. This year’s gap is likely to reach 9.4 percent, he said in February.

Egypt relies on sales of domestic bills and bonds to finance its debt. Yields have surged to the highest levels since Bloomberg started tracking the data in 2006 after foreign investors dumped the securities following the revolution that ousted President Hosni Mubarak in 2011. Holdings of foreigners have plunged 93 percent to 3.8 billion pounds as of January from a year-earlier, according to central bank data.

The yield on the 5.75 percent dollar bonds due April 2020 advanced two basis points, or 0.02 percentage point, to 6.92 percent at 1:33 p.m. in Cairo, according to prices compiled by Bloomberg.

The Egyptian pound, subject to a managed float, rose 0.1 percent to 6.0328 a dollar, headed for the highest close in almost two months. Twelve-month non-deliverable forwards were unchanged at 7.5 a dollar, the highest level since Bloomberg started tracking them in 2007. That reflects expectations for the currency to weaken 20 percent over the life of the contracts.

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