The Central Bank of Egypt (CBE) is offering treasury bills worth $1.1bn on behalf of the Ministry of Finance on Monday.
According to a statement received by banks operating in the domestic market, these bills are being offered to pay old bills that were offered on 16 December 2014 at the value of $1.17bn, which are due on 15 December 2015. The CBE explained that the new bills are presented for a year.
The CBE allows subscription to the bills for local banks and foreign institutions with a minimum subscription of $100,000. It had offered a similar tender in dollars in February.
Domestic and international banks and financial institutions offered to invest $2.287 in the February tender, and the CBE approved $1.77bn.
The interest rate that international and local financial institutions will obtain in return for investing in these dollar bills will be a minimum of 2.8% and a maximum of 2.84%, averaging at 2.83%.
According to analysts, the new tender’s interest rate is likely to stabilise at this same level, especially with the stability of interest rates on dollars in global markets.
Global and local financial markets await the US Federal Reserve’s Federal Open Market Committee (FOMC) meeting scheduled for 15 and 16 December. During the meeting, the committee will decide the fate of the interest on the dollar, which has remained between 0% and 0.25%.
The CBE began to propose dollar treasury bills on 30 November 2011. It allows all international and local organisations and banks to take part in the tender with a minimum subscription of $100,000 and its multiples.
The return on dollar bills in the local market is determined through a number of indicators, in particular the size of dollar liquidity in the market, alternative available investment opportunities, and the state’s credit rating.
The average return on the first tender of those bills was 3.87%.
Banks operating in the local market rely on these bills to invest their liquidity in dollars safely with the government, with an appropriate yield, in light of the lack of other investments for such liquidity. Exceptions include rare syndicated loans or investment in global capital markets with a low yield and many risks.