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Thursday, 10 October 2019

Egypt’s USD bonds fall amid anticipation of new issuance

 Investors shy away from Egypt’s USD-denominated bonds in anticipation of new issuance: Egypt’s 30-year USD-denominated bonds dropped USD 0.009 to USD 1.053, its biggest fall in one day since protests last month, and the 2047 bond fell USD 0.003 to USD 1.04, its lowest in almost two months, Reuters reported. “There’s been some noise about a new [USD] bond issuance coming out of Egypt soon and, given the heavy investor positioning, we might expect some selling as investors make space in their portfolios to purchase the new issue in the primary market,” said Farouk Soussa, senior Middle East and North Africa economist with Goldman Sachs. Soussa also pointed to concerns about supply. Egypt plans to issue USD 3-7 bn in international bonds during FY2019-2020, Finance Minister Mohamed Maait said last month.

Other potential causes for the fall: Concerns from investors that Egypt may take steps to reverse austerity measures such as subsidy cuts to calm public discontent could have also been behind today’s fall, Capital Economics’ Jason Tuvey told the newswire. “There might be concern that if protests escalate then Egypt’s debt ratio could be put on an upward path,” said Tuvey. The government last month restored some 1.8 mn people to subsidy rolls who had previously been disqualified for earning too much, and on Tuesday some members of parliament called on the government to take action on wages, pensions, and social programs.

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