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Monday, 20 September 2021

Companies + governments are rushing to issue debt before the Fed taper

Companies + governments are rushing to issue debt before the Fed taper: The past week saw a spike in USD- and EUR-denominated bond issuances in emerging markets, as anticipation builds that the Federal Reserve could announce a timeline for tapering its covid stimulus programme when it meets this week, Bloomberg reports. Concerned about an imminent rise in US rates, governments and companies in EMs have looked to capitalize on the current low-rate environment, selling some USD 36 bn of bonds last week — almost a third of the volume issued over the previous 10 weeks combined.

“It is going to pick up pretty fast from now and the fourth quarter will be high,” said a London-based analyst at Vanguard Asset Management. “Many countries have yet to complete their funding and some will pre-finance next year, especially before Fed tapering.”

The majority of economists are expecting the Fed to curtail its bond-buying programme before the end of the year: More than 70% of economists recently surveyed by the Financial Times expect an announcement either in November or December, while 60% of economists polled by Reuters see the first move coming in December.

Also worth noting this morning:

  • US junk debt sales are on course for a record year: Companies with junk credit ratings have issued more than USD 786 bn of bonds and loans so far this year, beating full-year sales for every year since 2008. Investors and analysts expect 2021 to set a new record for junk issuances, as companies take advantage of ultra-low interest rates and investors desperate for returns buy into the riskiest debt. (WSJ)
  • Another casualty of the China tech smackdown: China’s ride-hailing app Didi has seen its users plunge 30% after the app faced backlash from Chinese regulators after its USD 4.4 bn IPO last June. China’s cyber security regulator ordered Didi to be removed from domestic app stores in July, alleging that the company had illegally collected customer data and violated antitrust rules. The app launched in Alexandria last week, with plans to soon expand to the rest of Egypt. (FT)
  • Wall Street firms aren’t being deterred from the crypto markets by increasing talk of regulation: Wall Street trading firms are planning to expand their crypto footprint, with US equity players Jump Trading, GTS and Jane Street all saying they are in the process of setting up separate businesses for proprietary trading in digital assets. (FT)

Down

EGX30

10,890

-1.0% (YTD: +0.4%)

None

USD (CBE)

Buy 15.66

Sell 15.76

None

USD at CIB

Buy 15.66

Sell 15.76

None

Interest rates CBE

8.25% deposit

9.25% lending

Down

Tadawul

11,397

-0.2% (YTD: +31.2%)

Down

ADX

7,808

-1.0% (YTD: +54.8%)

Up

DFM

2,905

+0.2% (YTD: +16.6%)

Down

S&P 500

4,432

-0.9% (YTD: +18.0%)

Down

FTSE 100

6,963

-0.9% (YTD: +7.8%)

Down

Brent crude

USD 75.34

-0.4%

Down

Natural gas (Nymex)

USD 5.11

-4.3%

Down

Gold

USD 1,751.40

-0.3%

Down

BTC

USD 47,412

-1.2% (as of midnight)

THE CLOSING BELL-

The EGX30 fell 1.0% at yesterday’s close on turnover of EGP 1.2 bn (23.1% below the 90-day average). Foreign investors were net buyers. The index is up 0.4% YTD.

In the green: Abou Kir Fertilizers (+4.0%), Mopco (+3.5%) and AMOC (+1.7%).

In the red: Fawry (-7.3%), Egyptian Resorts Company (-5.8%) and MM Group (-4.9%).

Asian markets are firmly in the red this morning amid concerns about an imminent Fed taper and the fate of Chinese real estate giant Evergrande. Shares in Europe and the US will follow them according to stock futures.

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