Egypt’s three-year borrowing costs jumped to a seven-month high at a treasury-bond sale as the central bank’s interest-rate increase and a credit-rating downgrade led investors to seek higher returns.
The North African country sold 1 billion pounds ($147 million) of treasury bonds maturing in 2016 at an average yield of 15.33 percent, up 99 basis points, or 0.99 percentage point, from an auction last month, according to data compiled by Bloomberg. The average yield on 500 million pounds of 10-year bonds jumped 69 basis points to 17 percent.
Government borrowing costs have surged since the central bank raised its benchmark deposit and lending rates on March 21 and Moody’s Investors Service pushed Egypt’s credit rating further into junk the same day. The average yield on nine-month securities rose from a four-month low, climbing 91 basis points to 14.39 percent. The government seeks to raise 170 billion pounds this quarter, which would set a record if achieved.
Egypt’s budget deficit, primarily funded through local debt sales, increased to 146.5 billion pounds in the first eight months of the fiscal year from 94.7 billion pounds in the year-earlier period, the Finance Ministry said last week.
The central bank sold $39.2 million at a currency auction today at a weighted average exchange rate of 6.7997 pounds a dollar, down 0.1 percent from the last sale on March 28. The pound weakened by the same amount to 6.8096 a dollar as of 2:38 p.m. in Cairo, according to Bank of Alexandria pricing. That takes the pound’s depreciation to 9.1 percent since the central bank started the auctions on Dec. 30 to limit access to dollars.
The yield on the government’s $1 billion of benchmark 5.75 percent eurobonds due in April 2020 advanced three basis points to 8.44 percent, the highest level on a closing basis since January 2012.
Investors submitted bids for 1.7 times the three-year bonds offered today and 1.8 times the 10-year notes, according to central bank data on Bloomberg. The regulator accepted yields as high as 15.5 percent and 17.15 percent for the two maturities, the data show.