Egypt’s five-year credit default swaps tightened to 330 bps after falling by around 120 bps since the start of 2017, reflecting rapid improvement in the country’s risk perception, according to BNP Paribas’ Africa DCM Weekly Update. For the uninitiated: CDS are credit derivatives that are “similar to an insurance contract, providing the buyer with protection against specific risks. Most often, investors buy credit default swaps for protection against a default.” In this case, they imply the cost of insuring against sovereign default in foreign currency. The report shows that the YTD improvement in Egypt’s CDS is faster than other emerging market laggards such as Mexico, Indonesia, and the Philippines, as well as Brazil, Russia, and South Africa. Egypt CDS are also currently 100 bps tighter than Tunisia’s despite Tunisia having a credit rating three notches higher than Egypt’s.

BNP Paribas senior banker Youssef Beshay tells us that the drop to circa 330 bps in Egypt’s CDS is similar to Argentina’s since the start of the year “on back of enhanced risk perception and successful return to international bond markets.”