Egypt Prevailing Over Banks as Auction Borrowing Costs Drop: Arab Credit - Bloomberg

Egypt’s falling borrowing costs show the government may have won a showdown with creditors by cutting its budget deficit target and canceling a debt sale after yields hit a three-year high.

Yields on treasury bills fell yesterday for the third straight auction after the central bank called off the first sale in the fiscal year that started July 1 when investors demanded higher returns. The average yield on 3.5 billion Egyptian pounds ($588 million) of nine-month notes dropped 21 basis points from last week’s auction, the most since October, to 12.681 percent, according to Finance Ministry data.

Finance Minister Samir Radwan’s decision to lower the budget deficit target by about 2.5 percentage points to 8.6 percent of economic output reduces the need for him to go to local markets for financing, helping to lower yields, economists at investment banks EFG-Hermes Holding SAE and CI Capital Holding say.

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