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Wednesday, 12 September 2018

Egypt cancels second T-bond sale this month due to high yields

**#2 Egypt cancels second T-bond sale this month due to high yields: Egypt canceled a sale of EGP 3.5 bn worth of five- and 10-year instruments on Monday, according to central bank data, with sources telling Al Mal that high yields on demand were behind the decision. Investors reportedly requested yields ranging from 18.90-18.95%, with some even asking for returns as high as 19.10% and 19.25% for the longer-term offering, the sources also said, adding that the Finance Ministry is likely to resort to the National Investment Bank to arrange the financing it had intended to raise through treasury sales. Reuters also has the story.

Reax: “‘What the government is doing, cancelling these auctions due to high yields, is very logical. How can the government sell at these prices for 10 years? … We want to shrink the budget deficit, not increase it. It’s best to focus on treasury bills in the coming period,’ one banker who spoke on condition of anonymity told Reuters.”

Background: Rising yields — which had hit highs of 19.64% and 19.31% at a Sunday auction for three- and nine-month bonds — had prompted the government to cancel another T-bond sale last week amid reports from the Finance Ministry that it was working on drafting a comprehensive debt control strategy that could rollout as early as October and see government bond issuances limited to medium-to-long term offerings. The plan, which could also see FX-denominated bond sales scrapped this year, would also set limits on internal and external borrowing in a bid to push overall debt levels down to 91% of GDP from a current 98%. The country’s foreign debt levels at the end of FY2017-18 stood at USD 92.64 bn, up from USD 88.2 bn at the end of third quarter in March.

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