Egypt Pays Record-Low Dollar Debt Yield Before Next Month’s Vote

Egypt’s dollar-denominated T-bills paid the lowest yield on record at an auction today on prospects of increased political stability in North Africa’s largest economy.

The nation sold $1.19 billion of one-year notes at an average yield of 2.642 percent, according to an e-mailed statement from the central bank. That’s 10 basis points, or 0.1 percentage point, lower than the last similar sale in November. Bids for the securities were 1.3 times the $1.2 billion offered, the data show.

Egypt, which has $1.22 billion due tomorrow, has seen local borrowing costs plunge as its military-backed leadership moves toward elections next year with a public vote on a new constitution due to start Jan. 14. The country started selling foreign-currency debt locally in 2011 to curb the decline of reserves. The central bank cut benchmark interest rates this month for the third time since August to boost economic growth. That has also helped push local borrowing costs to the lowest levels since January 2011.

“Any perceived improvement in the political or economic picture will reflect more on the dollar and euro T-bills than the pound ones,” Nour Mohei-el-Din, assistant general manager for treasury at BNP Paribas Egypt SAE, said by phone. “Dollar T-bills still offer attractive yields, especially with rates coming down on the pound.”

The yield on one-year pound-denominated T-bills fell 38 basis points at last week’s auction to 10.95 percent, taking its decline since the military takeover of power in July to 446 basis points.

The government also raised 3 billion Egyptian pounds at an auction of three- and seven-year T-bonds, according to Finance Ministry data. The yield on 2016 notes fell 19 basis points from the last sale Dec. 2 to 12.2 percent, while the yield on 2020 securities advanced five basis points to 13.95 percent.

The pound was little changed at 6.8867 per dollar in interbank trading, according to BNP Paribas MENA prices, after a regular central bank currency auction at which the weighted average price was also little changed 6.8767 pounds to the dollar.

The yield on the government’s 5.75 percent Eurobonds due in April 2020 bonds retreated 2 basis points to 6.83 percent, data compiled by Bloomberg shows. That’s the lowest level on a closing basis since September.

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