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Tuesday, 25 September 2018

Egypt cancels bond auction for the fourth consecutive week

**#1 Egypt cancels bond auction for the fourth consecutive week: Egypt called off its fourth treasury bond auction in as many weeks on Monday, the Finance Ministry said on Monday. Officials called off sales of five- and 10-year treasury bonds worth EGP 3 bn because of the high yields on demand. Bankers speaking to Reuters say that yields requested at Monday’s sale were between 18.5% and 19.0%.

Despite the Finance Ministry’s best plans to rely on longer-tenor debt issuances, it has had to depend on shorter-term treasury bills to cover financing. “To date in September, Egypt has raised EGP 7.1 bn in excess cash through auctions. In August they raised a total of EGP 12.7 bn from treasury bonds, so you can presume the bulk of the shortfall has been covered by the increased issuance of shorter-duration bills,” said Allen Sandeep, head of research at Naeem Brokerage. “The Ministry of Finance is trying not to lock in such high yields for an extended period of time. Historically, they have gone for months without issuing bonds and were able to raise all the funds they need via [shorter term] treasury bills,” another banker said.

But how long can this last? Yields on EGP-denominated short-term treasuries continued to rise on Sunday with the return on 91-day bills rising to 19.62%, while yields at the nine-month auction rose to 19.84%.

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