© Reuters.
Investing.com – Bloomberg reported a short while ago that Egypt sold a small portion of the bonds offered for sale at an auction, as this comes in conjunction with increasing investor concerns about a new drop in the value of the pound, which prompted them to refrain from buying more bonds.
Egypt sold nearly 1.09 million ($35,275) of three-year securities late Monday, the lowest amount it has ever raised in a domestic sale of securities, according to data compiled by Bloomberg.
The amount was only 0.04% of the 3 billion pounds of securities initially offered. The government accepted a single bid of 21.7% after investors demanded returns of up to 28%, according to the agency.
Demand for Egypt’s local currency debt has shrunk, pushing yields to record levels, amid expectations that the country may have to devalue its currency for the fourth time in nearly a year.
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Black market
The value of the pound has diverged on the local black market against the US compared to the official rate, as the Egyptian government tries to secure hard currency and foreign direct investment, including from the Gulf, according to Bloomberg.
And on Thursday, the Central Bank of Egypt raised its main interest rate by 200 basis points last week to 18.25% in a bid to curb inflation.
“The parallel exchange rate tells us that the Egyptian currency needs to weaken further,” said Edwin Gutierrez, head of emerging market sovereign debt at Abrdn Plc.
sharp drop in pounds
Derivatives traders are hedging against the possibility of a sharp drop in the pound. Further currency depreciations threaten to exacerbate inflation, which rose to 31.9% in February, according to the agency.
In the non-deliverable futures market, the 12-month pound fell this week, crossing 41 against the US dollar for the first time, while the 3-month dollar recorded 34.8 pounds. The pound has fallen around 50% since March last year and was trading around 30.8 on Tuesday.
The agency said that the Gulf countries are awaiting more certainty about the pound, and evidence that Egypt is following up on its commitments to reviving the economy before fulfilling its promises to provide billions of dollars in investments.
