Egypt Eyes Taking Bond Sales Eastward After $4 Billion Offer

  • Country sells three maturities of dollar-denominated notes
  • Bonds price at premium over existing notes and emerging peers

Egypt may sell bonds in Japanese yen and Chinese yuan after the country raised $4 billion in its first foray into international capital markets since a currency devaluation in November.

The sale of dollar-denominated bonds across three maturities on Tuesday was covered “multiple times,” and the country is now “studying carefully” future sales of notes in the Japanese and Chinese currencies, Finance Minister Amr El-Garhy said in an interview Wednesday with Bloomberg TV in London.

The transaction comes two months after Egypt dismantled a currency peg, triggering a 50 percent devaluation as part of a package of reforms aimed at luring back foreign investors. Money managers buying the new notes were offered a premium -- about 30 basis points on the yield for 10-year securities in the sale over similar maturity bonds issued in 2015.

The bonds were “fairly generously priced compared to existing securities and to other similarly-rated sovereigns like Pakistan and Sri Lanka,” Abdul Kadir Hussain, the head of fixed-income asset management at Arqaam Capital Ltd. in Dubai, said in an e-mail . The sale “should alleviate some short-term pressures on the currency, although Egypt will have to continue the process of stabilizing and growing its domestic economy.”

Egypt’s El-Garhy on Capital Gains Tax, Stamp Duty

Source: Bloomberg

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The sale was spread across three maturities, with five-year notes yielding 6.125 percent, 10-year notes offering 7.5 percent, and 30-year securities at 8.5 percent. That compares with an average yield on emerging-market sovereign debt of 4.9 percent, according to a Bloomberg index.

Egypt’s economy, Africa’s third-largest, has seen more than a year of contracting business activity, amid political instability since the 2011 Arab Spring uprising and exacerbated by the terrorist downing of a Russian holiday jet in 2015.

“A combination of attractive high-yield levels together with scarcity value -- Egypt is a rare issuer -- and some positive expectations that Russia will resume flights to Egypt, also a positive signal to the tourism sector, leads to great performance of the deal,” said Sergey Dergachev, who helps oversee about $13 billion in assets as a senior money manager at Union Investment Privatfonds GmbH in Frankfurt.

The country signed a $12 billion International Monetary Fund loan in November, the biggest ever for a Middle Eastern nation as part of a package of measures to restore economic stability.

BNP Paribas SA, Citigroup Inc., JPMorgan Chase & Co. and Natixis SA arranged this week’s bond sale.

— With assistance by Archana Narayanan

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