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Egypt Yields Rise After Budget Approval; Dollar Bonds Fall

Egypt sold its target 6.5 billion Egyptian pounds ($1.1 billion) of treasury bills after the government approved reducing the budget deficit next fiscal year. The dollar bonds fell for a fifth day.

The North African country accepted bids for six- and 12-month securities valued at 3 billion pounds and 3.5 billion pounds, respectively, according to central bank data on Bloomberg. The average yield on six-month securities climbed 11 basis points, or 0.11 of a percentage point, to 15.194 percent, the highest level since Bloomberg started tracking the data in 2006. The one-year bill yield gained three basis points to 15.882 percent.

Egypt’s cabinet said yesterday it approved a budget for the year that starts in July that cuts the deficit to 7.6 percent of gross domestic product compared with its 8.6 percent target this year. Egypt is seeking economic growth of 4 percent to 4.5 percent next year, Planning Minister Fayza Aboulnaga said May 14. The budget still needs approval from parliament and the military council that took over executive powers after the ouster of President Hosni Mubarak last year.

Lowering Deficit

“We’re still in an economy where the budget deficit is still financed mainly by the treasury bills,” said Moustafa Assal, managing director of Bondlink Advisory, a Cairo-based government securities brokerage. “As long as the economy isn’t recovering and foreign direct investment stays away, yields may remain elevated or increase at least for the next six months to a year.”

Egypt’s economy expanded 0.4 percent in the three months through Dec. 31, compared with growth of 0.2 percent in the previous quarter and 5.6 percent a year earlier, according to the most-recent official figures.

The yield on the Egypt’s 5.75 percent dollar bonds due in April 2020 increased three basis points, or 0.03 of a percentage point, to 7.02 percent at 3:34 p.m. in Cairo, according to prices compiled by Bloomberg. The Egyptian pound weakened 0.1 percent to 6.0471 a dollar.

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