Egypt Borrowing Costs Rise as Mursi Power Grab Sparks Violence

Egypt’s nine-month borrowing costs climbed to the highest level in six weeks after President Mohamed Mursi issued a decree to prevent judicial oversight of his decisions, sparking violent protests.

The Arab country raised its target 5 billion Egyptian pounds ($821 million) at an auction of treasury bills today, according to central bank data on Bloomberg. The average yield on 3.5 billion pounds of nine-month notes gained 30 basis points, or 0.3 of a percentage point, to 13.19 percent, the highest level since an Oct. 14 sale. The yield on 1.5 billion pounds of three-month bills increased 20 basis points to 12.5 percent.

Dozens of people were injured over the weekend in clashes between supporters and opponents of Mursi’s moves on Nov. 22 to fire the country’s prosecutor general, protect a disputed constitution-drafting committee from court challenges and order re-trials of officials from former President Hosni Mubarak’s regime. Mursi said all his decisions, dating back to his assumption of office in June, cannot be challenged in court.

“Banks are becoming more conservative in anticipation of political developments,” Sherif Othman, head of treasury at Arab Bank Corp., said by phone. “Investors will be concerned anytime there’s blood on the streets so the government has to start a dialogue to resolve the current situation.”

The U.S. and European Union criticized Mursi’s decree. Egypt reached preliminary agreement with the IMF on Nov. 20 for a loan of as much as $4.8 billion.

The yield on the nation’s 5.75 percent dollar-denominated bonds due in April 2020 advanced one basis point to 5.13 percent on Nov. 23, according to prices compiled by Bloomberg. The pound, subject to a managed float, was little changed at 6.0897 a dollar.

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