Local and international banks offered to invest $1.12bn in the treasury bills (T-bills) offered by the Central Bank of Egypt (CBE) for auction denominated in dollars on Monday on behalf of the Ministry of Finance.
Of this liquidity, the CBE posed the tender with a maturity period of 364 days, due on 13 February 2018.
According to data obtained by Daily News Egypt, the CBE received 33 offers from various local and international financial institutions to cover the tender, with a proposed interest rate ranging between 3.57-4.3%.
The CBE accepted 29 offers worth $1.09bn with an interest rate ranging between 3.57% and 3.62%, and an average interest rate of 3.62%, compared to 3.65% and 3.7% in a similar tender recently posed by the CBE on 10 January 2017.
The CBE has begun offering USD-denominated bills on 27 November 2011, totaling 21 tenders since.
Over the remaining part of 2017, the CBE is set to offer four tenders worth $4.8281bn, including $1.2679bn on 9 May, $745.4m on 12 June, $1.6936bn on 21 November, and $1.1185 on 12 December.
The interest rate on dollar bills in the local market is decided in accordance with a number of factors, most prominently the volume of dollar liquidity in the market, the alternative investment opportunities provided for local and foreign financial institutions that invest in these bills, and the country’s credit rating.
The CBE allows local banks and foreign institutions to subscribe for dollar bills with a minimum of $100,000 and its multiples.
Banks operating in the local market heavily rely on these bills to invest their dollar liquidity due to its low risk and relatively strong interest rates.
Banks resort to these bills in light of the lack of other available channels for this liquidity—with the exception of a small number of syndicated loans that are proposed infrequently—or investing in the international capital market, which has high risks and low returns.