Egypt starts presidential elections today with its debt-risk premium almost double the level when Hosni Mubarak was ousted, evidence that investors doubt the vote alone can pull the country out of an economic slump.
The extra yield investors demand to hold Egyptian debt over U.S. Treasuries rose 94 basis points this quarter to 583 on May 21, outpacing a 57 basis-point gain in the Middle East spread, JPMorgan Chase & Co. data show. The rate was 299 on Feb. 10, 2011, the day before Mubarak’s three-decade rule came to an end.
Investors may avoid Egyptian assets until the nation secures a $3.2 billion loan it’s seeking from the International Monetary Fund to shore up public finances and the new president’s powers are clearly defined said analysts, including Michael Cirami of Eaton Vance Corp. (EV) With opinion polls showing none of the 13 candidates commanding a clear lead, results may not be known before June 21, following a second round of voting.
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