Egypt raises $1.5bn at yields below estimates

Egypt raised $1.53bn at yields lower than analysts estimated as investors flocked to the nation’s first sale of one-year dollar-denominated bills.

The government sold the notes at an average yield of 3.87%, or 376 basis points over similar-maturity US government securities, beating the 5.25% median estimate in a Bloomberg survey of seven analysts. The central bank said it received bids for 1.3 times the $2bn offered to domestic and international investors.

“Egyptian banks are long on the dollar because of political and economic instability so this issuance was attractive because of the sizable spread it offered,” said Moustafa Assal, the head of fixed-income at Beltone Financial Holding, a Cairo-based investment bank. “Demand from local banks and foreign investors resulted in a relatively low average yield.”

The North African country that is undertaking its first parliamentary vote since the ouster of President Hosni Mubarak in February sold the dollar-denominated notes after local-currency borrowing costs soared.

Yields on the country’s one- year Egyptian pound-denominated notes rose 449 basis points, or 4.49 percentage points, since January to 14.932% at last week’s auction.

The yield on one-year US government bills was 0.11% yesterday.

The benchmark EGX 30 Index of stocks rose for a fourth day, buoyed by a largely peaceful first stage of the vote due to be completed in March.

Egypt may be attempting to stem the drop in its foreign currency reserves and control borrowing costs, Alia Moubayed, a London-based senior economist at Barclays Capital, said by e- mail before the auction.

Official reserves have declined $13.9bn since the start of the year, the most in any year since Bloomberg started tracking the data in 2004.

The country last sold dollar debt in April 2010, paying 5.75% on 10-year Eurobonds.