Egypt bonds quiet amid high interbank rates

ABDALLA F. HASSAN | Reuters | February 26, 2001

CAIRO, Feb 26 (Reuters) – The Egyptian bond market is expected to remain quiet this week amid rising interbank rates and liquidity shortages, analysts said.

 

“I don’t think the market adjusts according to supply, demand and interbank, and this is due mainly to lack of liquidity,” said Moustafa Assal, head of fixed income at ABN AMRO Delta. Uncertainty still lingers concerning the direction of interest rates and opaque economic policy, analysts said.

 

The median overnight interbank rate on Egypt’s pound stood at 12-1/4 percent on Monday in a short to moderate market, bankers said. The interbank market is the main source of liquidity for banks.

 

Tarek El Ashmawy, head of fixed income at Commercial International Brokerage Co, expected interbank rates to remain in the range of 11 to 13.5 percent in the short term.

 

“We still have a liquidity shortage. Last week the Central Bank launched four repos. For the week we expect further tightening in liquidity despite further repos,” he said.

 

The bonds in focus are the May 2007 and the October 2003.

 

For the October 2003 Treasury bond, bids are at 9.98 to 10.03 percent and offers at 9.90 to 9.95 percent. For May 2007 Treasury bonds, bids are 10.40 to 10.45 percent and offers at 10.30 to 10.33 percent, said Ashmawy.

 

Sunday saw no activity in the bond market. Six million pounds in the 2007 bond were traded on Monday. Analysts forecast 10 to 20 million pounds worth of bond volume for the week.

 

Last week chalked up 10 million pounds in volume for Treasuries and 6.5 million pounds in corporate bonds for Arab Bank maturing in 2004, and Arab Land Bank maturing in 2003.

 

Limited demand persists in the corporate bond market, with scant demand for bonds with maturities longer than two years.

 

Some 980 million pounds in corporate bonds – Citibank, American Express, Egyptian British Bank, Egyptian American Bank and Egyptian Engineers – are maturing this year.

 

Banks, who are the dominant players in the debt market, purchase Treasury bonds to meet their liquidity requirements in compliance with Central Bank requirements or to utilise excess funds. ($1=3.88 Egyptian pounds)