By Tom Pfeiffer / Reuters
CAIRO: Egypt’s central bank sold more treasury bills than it originally offered at an auction on Sunday, as optimism that the country will secure an emergency IMF loan draws more local investors into high-yielding government debt, analysts said.
The bank sold LE 4.5 billion ($746 million) of 266-day T-bills, instead of the LE 3.5 billion it had offered. The average yield edged down to 15.841 percent from 15.91 percent at the last issue on Feb. 28.
The government was repeatedly missing its fund-raising targets at T-bill auctions until recent weeks, when demand from local banks picked up.
Egypt has requested a $3.2 billion lending program from the IMF to help plug budget and balance of payments deficits that widened to what economists see as unsustainable levels, after an uprising unseated the country’s president last year.
The IMF said on Thursday a delegation would visit Egypt later in March for discussions on the lending program after the army-backed government submitted a new deficit-cutting plan.
The plan still needs political support in Egypt but some investors appear to believe it will pass, and that foreign funds will begin flowing.
Yields have edged down from historic highs at recent treasury bill auctions and demand for short-term government debt on the secondary market has revived after more than a year of stagnation.
Traders said the secondary market revival comes as investors differ over the direction of yields in coming months.
“The recent auctions give significant reason for investors to at least slightly increase their purchases of longer-term instruments, so they wouldn’t have missed out if this is indeed the beginning of a reversal,” said Youssef Kamel, a Cairo-based fixed-income analyst at Rasmala.
The buying trend is underpinned by the increased likelihood of foreign aid materializing and the reduced risk of a currency devaluation, Kamel said.
The Egyptian pound has stabilized after gradually losing around 3.6 percent of its value against the dollar since the uprising in January last year. A slide in Egypt’s foreign reserves slowed last month.
Some investors think rates could go higher still, after pausing in recent weeks because of the continued strain on state finances and uncertainty over the transition to civilian rule.
Foreign investors are still absent from Egyptian debt auctions after retreating en masse after the uprising.
“I don’t think foreign investors are scared of the exchange rate, but they want to see a clear economic policy. As long as it isn’t there, people are too scared to invest,” said Ahmed Yahia at BNP Paribas, who expects yields to continue climbing. –Additional reporting by Mohamed Samir
