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  • 06-04-23

    Egyptian Government Rejects High Yield Demands from Investors for Three-Year Treasury Bonds

    (MENAFN) The Egyptian government rejected high yields demanded by investors for three-year treasury bonds issued on Tuesday, resulting in sales plummeting to 1.09 million Egyptian pounds (USD35,332). The central bank received 26 bids worth 5.77 billion pounds with a weighted average yield of 24.15 percent at an auction on Monday, but accepted only one of these bids at a yield of 21.7 percent. This accepted yield was unchanged from a similar offering on March 21, when 5.06 billion pounds were sold, despite a 200 basis-point increase in the central bank's overnight deposit rate to 18.75 percent on Thursday.

    According to analysts, investors are also holding back bond purchases on the expectation that treasury bond yields will soon begin rising to match the increase in overnight rates. The central bank stated that it raised rates to help tame soaring inflation, which leapt to 31.9 percent in February. However, pressure has been building on Egypt to devalue its currency after it lost ground on the black market in recent weeks, even though its official price has fallen by half against the dollar over the last year.

    The official price of the pound has remained relatively unchanged over the last four weeks at about 30.9 to the dollar, while on the black market it has been trading at between 36 and 37, according to bankers and dealers. The rejection of high yields by the government may indicate its reluctance to offer greater returns to investors who are concerned about the currency's potential depreciation. This development could also lead to further pressure on the pound and the government's efforts to stabilize the economy.

    MENAFN06042023000045014228ID1105954118

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