Egypt is seeking to raise 6 billion pounds ($997 million) in treasury bills today, a day after its default risk had the world’s second-biggest surge.
The Ministry of Finance plans to sell 3.5 billion pounds in one-year securities and 2.5bn pounds in six-month notes, central bank data on Bloomberg show. Egypt’s credit default swaps jumped 22 basis points yesterday, two basis points less than those of China Development Bank Corp, to 610, according to data provider CMA.
The surge puts Egypt’s debt among the world’s 10 riskiest credits, in the company of countries such as Argentina and Ireland, according to CMA, which is owned by is CME Group Inc and compiles prices quoted by dealers in the privately negotiated market. The government is stalling on asking the International Monetary Fund for a $3.2bn loan it turned down this year even after borrowing costs climbed to a record following a popular revolt that ousted the president.
“More people are coming to the realization that Egypt is in a difficult spot both politically and economically,” Michael Cirami, who helps manage $12bn at Boston-based Eaton Vance Corp, said in an e-mailed response to questions yesterday. “The country faces fiscal challenges and aid is not coming as easily or as quickly as market participants hoped.”
Voting ends today in the second round of Egypt’s parliamentary elections. The Muslim Brotherhood’s Freedom and Justice party won the first round, followed by the Nour Party, a Salafit group that has a strict interpretation of Islam. The military, which took power from the deposed President Hosni Mubarak, has said it will cede authority to civilians next year.
“The political process is highly uncertain and lengthy,” Cirami said.
The Ministry of Finance plans to raise $1bn in one- year treasury bills next week, its second offer of dollar securities domestically in less than a month. The sales helped push the yield on Egypt’s 5.75 per cent dollar Eurobond to a record because they offer “local banks alternative investment opportunities for dollar liquidity,” Andreas Kolbe, credit strategist at Barclays Capital in London, said yesterday.
“In addition to the political and macroeconomic challenges, the weakening support from locals has been a major driver of the underperformance” of the bond, he said in an e- mailed response to questions.
The yield on the notes due April 2020 advanced 24 basis points, or 0.24 percentage point, to 7.95 per cent yesterday, according to data compiled by Bloomberg. The Egyptian pound has lost 3.6 per cent this year to 6.0166 a dollar.
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