Egypt’s international bonds increased more than two cents following the Central Bank of Egypt‘s Wednesday decision to raise interest rates by 600 basis points.
The currency fell to new record lows, indicating the beginning of a long-awaited devaluation, according to Reuters.
Data from “Tradeweb” showed that longer-dated bonds made the biggest gains, with bonds due in 2047 rising 2.6 cents to 82.3 cents.
Financial analyst Mostafa Shafie, said that the CBE’s decision to raise interest by six percent and completely liberalize the exchange rate came in the interest of the Egyptian sovereign debt instruments.
It assures that Egypt would not be exposed to the risk of not paying its dollar obligations, and thus its confidence prevails in the government’s debt instruments and its external financing instruments, he said.
Shafie explained to Al-Masry Al-Youm that the rise in the value of international bonds came as a result of the Central Bank’s decision, which means a decrease in the yield on international bonds, thereby increasing the demand for Egyptian international bonds due to the satisfaction of foreign investors with the Egyptian economy.
Financial analyst Rania Yacoub echoed the sentiment, explaining that the central bank’s proactive move to raise interest rates by 600 basis points and liberalize the exchange rate directly impacted the Egyptian debt instruments offered in global markets, which saw positive movement due to the decisions.
The credit rating of Egypt is expected to be revised by international institutions in the near future, given the containment of the dollar flow crisis, which will reflect on the yields of Egyptian bonds in global markets.
Edited translation from Al-Masry Al-Youm
