Egypt Long-Term Growth May Limit 7-Year Bond Yields: Arab Credit

Egypt’s sale of five- and seven-year bonds may price to yield rates similar to the nation’s one-year notes on speculation economic growth will accelerate after elections next month.

The Arab country, whose popular uprising ended Hosni Mubarak’s three-decade rule in February, may pay 14.42 percent on five-year bonds at an auction today, according to the average forecast of five fixed-income analysts surveyed by Bloomberg. The average yield on seven-year notes may reach 14.8 percent, the survey shows. That compares with a rate of 13.8 percent at the sale of one-year bills last week.

“This is a small but important sale because its success may encourage foreign investors to return to the market and lower rates on treasury bills,” Nasser Abouelseoud, head of fixed income at Bank of Alexandria, the Cairo-based unit of Intesa Sanpaolo, said by phone Oct. 20. “Growth prospects are much brighter when an elected government has had time to bring back tourism and implement transparent policies.”

Egypt, which was cut to three levels below investment grade by Standard & Poor’s on Oct. 18, plans to raise a combined 2.5 billion pounds ($418 million) at today’s auctions. It’s the first debt sale with a maturity of more than three years since the start of the uprising in January. The country’s economy will grow 6.5 percent in 2016 after recording 4 percent growth in 2013 and 1.2 percent this year, according to International Monetary Fund forecasts.