Egypt signs deal with Euroclear to boost domestic debt management

Egypt on Saturday signed an agreement with Euroclear, Europe’s biggest settlement house for securities, to create a cross-border link with the Brussels-based institution.

Signed at the Egyptian embassy in Washington, D.C., the agreement will link the Egyptian government’s local currency debt issuance tools with Euroclear via a central securities depository to be established later in the country.

The agreement will make domestic Egyptian debt available to more foreign investors, a step that would eventually make the Egyptian debt “Euroclearable”, Euroclear said in a statement.

Egyptian Minister of Finance Mohamed Maait told Reuters last month that he expected Egyptian debt to become “Euroclearable” in early 2020.

In April, Egypt signed a memorandum of understanding with Euroclear to create the right market conditions for local currency sovereign debt issuance.

“This agreement will allow the market to maintain a large volume of liquidity and will lead to a decline in the borrowing cost, subsequently lowering yields on the debt bill and increasing the liquidity of local assets,” Maait said at a ministry’s statement.

Settling debt via Euroclear requires high levels of transparency along with specifics on the size and structure of the debt to be issued, among other criteria under Euroclear rules.

The deal will help Egypt achieve its goal of reaching a wider international institutional investor base and would lead to “a more robust capital market”, said Stephan Pouyat, global head of capital markets and fund services at Euroclear.

In September, Maait said Egypt plans to issue international bonds worth $3 billion to $7 billion in the 2019-2020 financial year.

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