Egypt's biggest public sector banks raise interest rates

Egypt’s two biggest public sector banks, National Bank of Egypt (NBE) and Banque Misr (BM), have raised interest rates on their Egyptian pound three-year certificate of deposits (CD) to reach 11.5 per cent from the current 9.5 per cent, effective 1 November.

This increase comes despite the Central Bank of Egypt's (CBE) decision to keep its benchmark interest rates on hold after its monetary policy meeting in October.The overnight lending and deposit rates remained unchanged at 9.75 per cent and 8.25 per cent, respectively. There has been no change in either of the rates since 17 September, 2009.

Beltone Financial, a leading Cairo-based investment house, said in a note issued today that the purpose of the move is to boost demand on the local currency through boosting attractiveness of its yields. CBE data shows that Egyptian pound deposits flow remained flat in the nine months up to September 2011, while foreign currency deposits have grown by 12 per cent.

The Egyptian government has been borrowing heavily from the local market, mainly banks, at increasingly growing yields, the highest since 2008.

"We foresee an upward adjustment in yields on treasury bills and bonds, especially that recently it has been the public sector players who have been the main buyers of the government debt." The note by Beltone read.