Credit Suisse sees scope for Egypt’s economic recovery to “steadily accelerate” and is “optimistic on the outlook for fiscal consolidation,” according to a recent report (pdf). The investment bank maintains its positive outlook on fixed income, particularly short-dated T-bills, and see scope for further steady appreciation in the EGP on improve macro fundamentals. The report does note that “the challenges facing Egypt remain significant and our recommendations therefore carry materially higher risk compared to our other Middle East recommendations.” Credit Suisse also sees scope for “credit rating upgrades as the macro environment improves, though it requires the government to keep making positive progress on the elevated fiscal deficit.”

…Separately, Egyptian eurobond yields declined to their lowest levels since issuance in January 2017, according to BNP Paribas’ Africa Weekly DCM Market update (pdf). The average yield declined by over 100 bps across the different maturities on favourable emerging markets backdrop and continued investor confidence in Egypt’s reforms. “One factor driving continued yield tightening for Egypt is increased liquidity. The bonds are trading better since inclusion of Eurobond tap in Emerging Markets Bond Diversified Index (EMBI Diversified) leading to increase of Egypt’s weight to 2.0% as of July higher than comparable EMs such as Morocco, Nigeria and Pakistan at 0.5-1.0% each and closer to South Africa and Peru at mid 2%. That is a key factor driving secondary market liquidity as the index is closely followed by all top EM investors,” the report states.