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The Daily Star: Egypt’s credit risk lower than peers’ as investors ignore ratings

Two major credit rating companies rank the country lower than Nigeria and Argentina, two of its main emerging-market competitors.
15.04.18 | Interesting article at The Daily Star

Egypt is bucking the conventional wisdom when it comes to gauging a country’s ability to repay its debt. Two major credit rating companies rank the country lower than Nigeria and Argentina, two of its main emerging-market competitors. Yet the cost of insuring Egypt’s debt against default for five years is lower than Nigeria’s and almost the same as Argentina’s. The suggestion is that investors are prepared to look past credit ratings when assessing a nation’s ability to repay debt.

No matter what they say, investors prefer strong macro and political continuity,” said Elina Ribakova, head of EMEA Research at Deutsche Bank AG in London. Argentina is still struggling to get inflation under control, while Nigeria’s foreign currency regime is “far from transparent,” she said.

Egypt’s high-yielding Treasury bills have attracted more than $20 billion in foreign investment since November 2016, thanks to the predictability of its politics and an International Monetary Fund-backed plan to cut spending and end a crippling dollar shortage. This week, it raised 2 billion euros in an international bond sale that attracted more than 7 billion euros in bids.