Dollar-Bond Yield Falls Most Since Revolution

Benchmark dollar-bond yield declined the most since the early days of last year’s uprising. The yield on the 5.75 percent notes due 2020 dropped 66 basis points, or 0.66 of a percentage point, to 7.21 percent at 2:49 p.m., the biggest drop on a closing basis since February 2011. The rate surged 97 basis points last week. The benchmark stock index soared 7.6 percent.

In his first televised address last night, Morsi, who won against Ahmed Shafik, Hosni Mubarak’s last premier, called for national unity, and promised to honor international treaties and work to build a “modern, constitutional” state. He saluted the people killed during the uprising and their families and also paid tribute to the armed forces, whose leaders currently lead the government.

“We expect a knee-jerk reaction to Morsi’s victory,” said Nour Mohei-el-Din, assistant general manager for treasury at BNP Paribas Egypt. “A positive trend in the bonds can only continue if his promises translate into real change for the economy, jobs are created and foreign investment comes back.” The country’s five-year credit default swaps, reflecting the cost to insure government debt for that period, dropped 26 basis points to 697, according to CMA, which is owned by CME Group Inc. and compiles data from the privately negotiated market. They’re still among the 10 riskiest credits in the world. The Egyptian pound, subject to a managed float, was little changed at 6.0564 a dollar.

“We’re still in the midst of a transitional period with no real positive effect on the economy,” Mohei-el-Din said. “Investors, especially in the 2020 and 2040 dollar bonds, need to see progress on the ground before they make the decision to come back.” The yield on Egypt’s 6.875 percent 2040 dollar notes retreated 26 basis points, the most since May 2011, to 8.64 percent, according to Bloomberg.