"A reminder – as if any were needed – of what the markets make of the ongoing political crisis in Egypt that led to the ousting on Wednesday of Mohamed Morsi, the country’s first freely elected president.
Yields on Egypt’s 2020 debt, just shy of 10 per cent a day ago, punched through that barrier to hit a new high of 10.44 per cent on Wednesday.
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The cost of insuring Egypt’s 10-year debt against default also hit a new high of 908.3.
Meanwhile the Egyptian pound continues its slide against the US dollar.
And the country’s benchmark EGX 30 stock index is down 9 per cent since June, or nearly 12 per cent this year.
It’s pretty clear no one knows what to make of today’s development. The move by the Egyptian military to oust Morsi, suspend the country’s constitution and install an interim government – while intended to bring an end to the recent chaos – has more likely ushered in a new era of uncertainty for the country. Even as the streets of Cairo erupt in celebration, the euphoria could soon give way to the harsh realities of trying to reconciliate the interests and demands of Egypt’s two main camps – Islamists who support Morsi and liberals and leftists who have been clamouring for his removal.
What happens now is anyone’s guess. Will there be retaliation by Morsi and his Muslim Brotherhood group? Events are still developing but it’s fair to say things in Egypt will stay messy and volatile for at least several more months. Expect this to put more pressure on the currency and foreign investors to remain edgy about re-entering the country."
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