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Thursday, 2 April 2020

Egypt to issue EGP 610 bn in treasuries this quarter

FinMin to issue EGP 610 bn in treasuries this quarter: The Finance Ministry is planning to issue EGP 610 bn (c. USD 38.74 bn) of treasuries in 2Q2020 to close the fiscal gap, according to data seen by the press. The government’s outstanding balance of treasuries (EGP-, USD-, and EUR-denominated) owed to debt investors stood at EGP 1.67 tn at the end of September, according to the latest central bank monthly statistical bulletin.

Gradual pivot to longer tenor: The quarter’s issuances will include EGP 22.5 bn-worth of three-year bonds, EGP 24.5 bn-worth of five-year bonds, EGP 19.5 bn worth of seven-year bonds, and EGP 21.5 bn worth of 10-year bonds (roughly 14% of the total). This will help the government achieve its goal of shifting to long-term debt to drive down the annual servicing bill to 20% of GDP as part of a four-year debt control strategy.

Government borrowing is going to come at a higher price: Yields in the primary market have shifted only marginally since the central bank made its record 300 bps rate cut in March. Rates on short- and long-term bonds have fallen at most by 80 bps as investors demand a higher return on investment amid sustained risk off sentiment and increased nerves over the government’s fiscal position.

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