Egypt misses T-bill sale target, yields rise

CAIRO: Average yields on Egyptian treasury bills rose at an auction on Thursday and the central bank sold fewer than the 5 billion Egyptian pounds ($826.9 million) of bills it had offered, the central bank said.

It sold 1 billion Egyptian pounds of 182-day bills, half the amount it had offered. The average yield was 15.007 percent, up from 14.895 percent at an auction last week.

The average yield on the 357-day T-bills was 15.748 percent, up from 15.554 at the last issue on April 24. It sold 2 billion pounds of the bills instead of the 3 billion pounds it offered.

It was the second time this week that the bank fell short of its fund raising target after two months during which government debt auctions were well covered and yields were easing from historic highs.

A diplomatic rupture last week with Saudi Arabia, a major economic partner for Egypt, and delays in a long-awaited IMF loan will increase the government's need to borrow locally, driving up interest rates.

Deadly clashes this week between thugs and protesters demanding an end to army rule have heightened concern the government will find it harder to get the political support it needs to resolve its financial problems.

A decision by the central bank in March to cut its reserve requirement on local currency deposits underpinned demand for government debt by injecting more liquidity into the local banks that account for most lending to the state since a popular uprising last year prompted an exodus of foreign investors.

One fixed-income analyst in Cairo said the effect of that temporary liquidity boost had now fizzled out.

"No surprises really," said the analyst, Youssef Kamel at Rasmala. "The reason yields dipped over the previous month was mainly due to the reduction in the required reserve ratio (RRR)."

"The excess liquidity that was freed up by the cut has been invested in treasuries over the auctions in April, which leaves us back to the same point we were in before the CBE reduced the RRR," he said.

The central bank, which is trying to battle stubbornly high inflation without snuffing out economic growth that is still to recover after last year's popular uprising, kept its benchmark deposit and lending rates steady on Thursday, as expected.

Egypt's worsening fiscal position and an inability to reach consensus on a financial programme ahead of a presidential election scheduled to begin on May 23 has also weighed on recent T-bill auctions, traders say.

Saudi authorities had planned to deposit $1 billion at Egypt's central bank and buy T-bonds worth $750 million by the end of April, according to an Egyptian official.

Egypt's planning minister said on Wednesday that Saudi Arabia had assured Egypt it would go ahead with a plan to provide $2.7 billion in financial aid and has begun steps to deposit the $1 billion with the central bank.

Egypt first announced that Saudi Arabia had pledged the $1 billion for deposit with the central bank a year ago, but the money has yet to arrive.





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