Egypt’s Ministry of Finance has revealed its intention to offer 32 bids for Treasury bills (T-bills) and bonds worth a combined total of EGP 246.5bn in December.
The offering includes 12 offerings for bonds worth EGP 48.5bn and 20 offerings for T-bills worth EGP 198bn.
The Ministry offering comes as part of the Egyptian government’s plan to borrow EGP 640bn from the local market, through T-bills and bonds. This aims to bridge the chronic deficit in the state budget during the second quarter (Q2) of fiscal year (FY) 2020/21.
According to the plan, the Central Bank of Egypt (CBE), on behalf of the Ministry of Finance, will issue: five bids in December for 91-day T-bills at a value of EGP 41.5bn; five bids for 182-day T-bills worth EGP 44bn, five bids for 273-day T-bills worth EGP 53.5bn; and five bids for 364-day T-bills at a value of EGP 59bn.
The plan also includes a bid for: two-year bonds worth EGP 2.5bn; two three-year bids worth EGP 8.5bn; and three five-year bonds worth EGP 16.5bn.
The Ministry of Finance will also offer two seven-year bond bids worth EGP 8.5bn, three 10-year bonds worth EGP 11.5bn, and 15-year bonds worth EGP 1bn.
The CBE’s Monetary Policy Committee (MPC) recently took the decision to reduce the basic interest rates by 0.50% to 8.25% for deposits, 9.25% for lending, and 8.75% for the credit and discount rates.
Monette Doss, a senior analyst for the macroeconomics and financial services sector at HC Securities, had expected that foreign flows to the Egyptian debt instruments market would not be affected due to its low returns.
She also noted that compared to other emerging markets, Egypt offers an attractive real return after taxes at 3.56% by calculating the rate of one-year T-bills at 13.6%. Egypt also has an inflation forecast at 8.0% for 2021, and 15% taxes on T-bills imposed on US and European investors.
Banks operating in the Egyptian market are the largest sector investing in bonds and bills, which the government issues periodically to cover the state’s general budget deficit.
These bonds and bills are offered through 15 banks that participate in the primary dealers system in the primary market. They sell part of these bonds and bills in the secondary market, to individual investors and local and foreign institutions.