Yields drop sharply on Egypt's T-bills after reserves surge

CAIRO – 6 August 2017: The average yields on Egypt's three- and nine-month treasury bills fell sharply in an auction on Sunday, central bank data showed, days after foreign currency reserves surged above their pre-2011 levels.

The average yield on the 91-day bill slipped to 19.131 percent from 20.767 percent at the last similar auction on July 30 and the yield on the 273-day bill fell to 18.878 percent from 20.570 percent.

Egypt's central bank said last week that foreign currency reserves jumped by $4.73 billion at the end of July to $36.04 billion, higher than before the uprising that drove away tourists and foreign investors, key sources of foreign currency.

"We are witnessing an influx of foreign inflows which is easing liquidity and reducing borrowing costs for the government," said Hany Farahat, senior economist at Cairo-based CI Capital.

Egypt's dollar liquidity has been improving since it floated the pound in November as part of a $12 billion International Monetary Fund programme aimed at boosting the economy.

Since the currency float, the central bank has raised key interest rates by 700 basis points, encouraging foreign investors to buy up its debt.