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Yields fall at Egyptian debt auction

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By Tom Pfeiffer / Reuters

CAIRO: The average yield declined on 273-day treasury bills auctioned by Egypt’s central bank on Sunday, the Ministry of Finance said, and strong recent buying of the same tenor on the secondary market suggest investors see further declines.

Traders said the central bank’s move on March 20 to lower its reserve requirement on local currency deposits had injected more liquidity into banks.

The government’s issuance plans for the final fiscal quarter that began on Sunday will place greater demand on them for fresh funds. Foreign investors have mostly steered clear of Egyptian government debt since last year’s popular uprising.

Many of this quarter’s issues will be for debt that the Ministry of Finance decided not to purchase in previous months when yields climbed to unsustainable highs.

Yields have eased since peaking around February on hopes for a peaceful transition from military to civilian rule in June and optimism that the government will secure an emergency loan from the International Monetary Fund to head off a fiscal crisis.

“We’re seeing a bit of a decline from the maximum yields because the recent reserve ratio cut has left the market a bit liquid,” said a trader at a Cairo bank. “The Ministry of Finance’s issuance schedule shows an increase in demand that is likely to stabilize the curve close to this level.”

The finance ministry says it plans to auction LE 150 billion ($24.83 billion) in T-bills and T-bonds this quarter. Last quarter it had planned to auction at least 164 billion pounds, but in the end sold only 147 billion, a Cairo-based fixed-income analyst said.

Far fewer securities were maturing and needed to be rolled over this quarter than last, he added.

The trader said retail clients have been buying up nine-month bills in the hope of making a short-term capital gain as yields ease.

Volume late last week in the secondary market showed a spike in executions on nine-month bills, which drew more than twice the level of buying compared to any other tenor.

At Sunday’s primary auction the average yield on 273-day bills edged down to 15.642 percent from 15.829 percent at the last issue on March 21 and the bank sold all the LE 3.5 billion ($579.5 million) of bills it had sought.

The bank also sold 91-day T-bills, the first auction of that tenor since Jan. 10. The yield climbed to 14.008 percent from 13.833 percent at the last issue. The central bank sold all 2 billion Egyptian pounds it had asked for.

“It’s clear that people don’t see a problem selling on government debt these days,” said another Cairo trader, who also noted strong buying by local retail investors.

The central bank sells the bills on behalf of the finance ministry. –With additional reporting by Patrick Werr and Mohamed Samir




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