The Assets and Liabilities Committees (ALICO) of banks will begin holding intensive meetings on Sunday to discuss the fate of interest rates on their savings vessels and loan products after the Central Bank of Egypt’s (CBE) decision to raise its interest rates by 3% at once last Thursday.
The Monetary Policy Committee (MPC) of the CBE had decided to raise the basic return rates by 3% to become 16.25% for deposits, 17.25% for lending, and 13.75% for the credit and discount rate and the price of the main operation at the CBE.
The CBE’s decision came as a surprise to the market and investment banks locally and globally, as most expectations indicated that CBE would increase the rates by between 1 or 2% at the most.
With this sudden increase, the CBE cumulatively raised its basic interest rates by 8% in 2022 — 1% on 21 March, 2% on 19 May, and 2% during the extraordinary meeting held by the MPC on 27 October, which came accompanying the decision to liberalise the EGP, and finally the 3% that the bank approved last Thursday.
In the first reaction to CBE’s decision, interest rates on variable-return certificates and some loan products were automatically priced at the CBE’s basic interest rates.
There are more than 20 variable-return certificates in the Egyptian market, the most famous of which are the platinum certificates of the NBE, and the top certificates issued by Banque Misr, in addition to a large number of variable-return loan products.
This comes as the market awaits the first reaction of return-on-debt instruments, which are scheduled to be offered on Sunday and Monday as per the CBE’s decision.
On Sunday, on behalf of the Ministry of Finance, the CBE will offer two tenders for treasury bills worth EGP 28.5bn — the first at a value of EGP 8bn for a period of 91 days, and the second at a value of EGP 20.5bn for a period of 273 days.
Additionally, on Monday, the bank will offer two tenders for bonds worth EGP 13.5bn — the first at a value of EGP 6bn for a year and a half “zero coupon”, and the second at a value of EGP 7.5bn for a period of three years.