CAIRO: Egypt’s central bank issued about twice the volume of three-year and seven-year treasury bonds on offer at an auction yesterday, as strong demand kept yields mostly unchanged two weeks after they hit a 10-month high.
The bank had accepted only a fraction of the bids on the maturities at their last auction in July. Yields then jumped more than 1 percent, following a surprise 100-basis-point increase in interest rates.
Egypt wants to reduce borrowing costs as it tries to revive an economy battered by more than three years of political turmoil. It also needs to reduce its budget deficit, which hit 12 percent of gross domestic product in the fiscal year that ended in June.
The state is also trying to contain inflation, which is expected to rise this month after the government cut subsidies on fuel and electricity in July and sent energy prices surging.
The auction results showed the government was “trying to compensate for the amounts they didn’t raise because they’re fighting yields,” said one Cairo-based fixed income trader. Egypt accepted bids worth 3.67bn Egyptian pounds($513.29m) for three-year bonds, compared with 1.5bn pounds offered. The average yield was down at 13.924 percent from 13.971 percent two weeks earlier.