Egypt T-Bill Yield Inches Up After Weeks Of Decline

Yields on 182-day Egyptian treasury bills edged up at auction on Wednesday, suggesting a decline that shaved almost 3 percentage points off government borrowing costs over the last two months may have come to a halt.

The average yield on 182-day treasury bills inched up to 12.818 percent at Wednesday’s auction from 12.801 percent at last week’s auction.

After the uprising that ousted Hosni Mubarak in February 2011, Egypt’s budget deficit ballooned to more than 11 percent of gross domestic product.

The increasingly cash-strapped government turned to local banks for finance, pushing T-bill yields to all-time highs, with the average yield on 182-day bills surging to over 15.5 percent in July.

Yields began falling after the newly appointed government of Prime Minister Hisham Kandial asked the International Monetary Fund for a $4.8 billion loan on Aug. 22 and after Qatar and other countries agreed to extend it credit.

Signs that a new government is moving ahead with tax reforms and cuts in hefty fuel subsidies to rein in the unsustainable public deficit have also pushed down yields.

Youssef Kamel, a fixed-income analyst at Rasmala, said that liquidity at banks had increased over the last two weeks and dollarisation had been declining, but there had been no recent change in fundamentals to justify further yield declines.

“I believe yields will stabilize near current levels for the time being and possibly increase slightly over the next few weeks,” he said.

“Furthermore, any deterioration in the political situation would likely be reflected on the markets.”

The government held the auction a day earlier than usual because banks will be closed on Thursday and Sunday because of the Eid al-Adha holiday.

The average yield on 357-day bills offered at the auction fell to 13.088 percent from 13.712 at an auction two weeks earlier.

The government sold 2.5 billion Egyptian pounds ($409.7 million) in 180-day bills and 3.5 billion pounds in 357-day bills, the same amounts it had offered.

An auction of 91-day and 266-day T-bills that normally would have been held on Sunday, has been delayed until Monday because of the holiday, the central bank said on its website.

Reuters