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Egypt Dollar Yield Drops to Record as Bank Deposits Rise

Egypt auctioned dollar-denominated notes at a record-low yield as rising foreign-currency deposits fuel demand for the debt.

The government raised 21 percent more than it sought today, selling $725.5 million of one-year dollar-denominated T-bills at an average yield of 2.236 percent, the lowest since it began selling the securities in November 2011, according to central bank data. Yields also declined at a 2.75 billion-pound ($385 million) sale of local-currency treasury bonds.

Demand for Egypt’s debt is rising after former army chief Abdel-Fattah El-Sisi won the presidency this month, helping lower borrowing costs. A new government is scheduled to be sworn in tomorrow, state-run television reported today. El-Sisi is backed by oil-rich Gulf Cooperation Council states, some of which have already pledged $15 billion since the military seized power in July.

“The drop in yields across the board today reflects expectations the government will improve its finances under the new president and lower borrowing costs even further,” Ahmed El Khouly, head of treasury at Cairo-based Housing & Development Bank, which holds the dollar-denominated T-bills, said by phone. The notes “are some of the most attractive debt the government offers considering the spread over Libor.”

Egypt started local sales of foreign currency-denominated debt the year a popular uprising toppled President Hosni Mubarak in a bid to replenish dwindling reserves amid political unrest. Foreign-currency deposits in local banks rose in April, taking their increase in 2014 to 5.3 percent, after retreating in four out of the last six months of last year, according to the most recent central bank data.

The average yield on five-year local-currency bonds sold today slid 10 basis points, or 0.1 of a percentage point, to 13.478 percent, according to central bank data on Bloomberg. The yield on 10-year notes dropped 23 basis points to 15.348 percent.

The yield on the nation’s benchmark $1 billion of 5.75 percent Eurobonds due in April 2020 advanced for a fifth day, rising two basis points to 4.9 percent as of 4:55 p.m. in Cairo. The pound was little changed at 7.1501 a dollar after a regular central bank auction of the U.S. currency to local lenders.

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