Egypt Yields Drop Most on Record as Stocks Jump as Morsi Ousted

Egypt’s benchmark bond yield headed for the biggest drop on record and stocks surged after the army deposed President Mohamed Morsi in a move it said aimed to restore stability. The nation’s credit risk declined.

The yield on the 5.75 percent bonds due in April 2020 plunged 1.01 percentage points, the most since the notes were sold in 2010, to 9.76 percent at 11:31 a.m. in Cairo, data compiled by Bloomberg show. The EGX 30 Index of stocks rallied 7.4 percent, the biggest jump since June 25, 2012, the first trading day after Morsi was declared Egypt’s first democratically elected president. Commercial International Bank Egypt SAE led the gains, surging 10 percent.

The nation’s five-year credit default swaps headed for the largest slide since April as Adly Mansour, the chief justice of the constitutional court, was sworn in as Egypt’s interim president. The army yesterday ousted Morsi, who hailed from the Muslim Brotherhood, and called early elections as part of a road map agreed on with politicians and religious leaders.

“Last night’s dancing and celebrations on the streets are being echoed in the market,” Ashraf Akhnoukh, Cairo-based senior manager for Middle East and North Africa markets at Commercial International Brokerage Co., said by phone. “Some could consider it a coup, but it’s still better for the country because it gives it a chance to move forward and rebuild its economy, something the Muslim Brotherhood clearly couldn’t do.”

Net Buyers

The CDS contracts dropped 75 basis points, the most since April 12, to 825, according to CMA, a data provider owned by McGraw-Hill Cos. that compiles prices quoted by dealers in the privately-negotiated market.

Egyptians were net buyers of about 150 million pounds ($21 million) of stocks in the last two days, as foreign investors exited, data compiled by Bloomberg show. The value of shares traded so far today was 116 million pounds, compared with a six-month daily average of 301 million pounds. The Market Vectors Egypt exchange-traded fund rose for a fifth day yesterday in New York.

The military’s announcement drew thunderous cheers from the hundreds of thousands who, for the past four days, gathered in Cairo’s Tahrir Square and across Egypt, united largely by their opposition to the president. Morsi, 61, said the army had carried out a coup and Muslim Brotherhood spokesman Gehad El-Haddad said the actions by the military were the work of “the old regime.”

Debt Auction

The country is struggling with the worst economic slump in two decades and facing the Middle East’s biggest budget deficit as a percentage of economic output. Egypt has about 169 billion pounds of local-currency debt repayments this quarter, a record, according to data compiled by Bloomberg.

The nation will seek to raise a combined 7 billion pounds of six-month and one-year treasury bills at an auction today, according to central bank data on Bloomberg. That’s part of a plan to raise 200 billion pounds in the three-month period.

The pound, whose movement on the interbank market is controlled by the central bank, weakened 0.1 percent, the most since May 16, to 7.0289 a dollar yesterday and was little changed today. The currency has weakened 12 percent since the central bank eased its support in December to trim a slump in foreign reserves.

Twelve-month non-deliverable forwards for the pound were unchanged at a record 9.05 a dollar, reflecting bets the currency will depreciate 22 percent in a year, data compiled by Bloomberg show.

Source:Bloomberg