Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

Dollar Bonds Jump against Egyptian Pound Futures amid Devaluation


Wed 04 Jan 2023 | 11:56 PM
Taarek Refaat

Egyptian dollar bonds led gains among emerging market sovereign bond peers on Wednesday after the pound weakened, boosting expectations that the authorities will comply with IMF requirements.

Notes due in 2061 rose between 5.5% and 7% to EGP 29.4 and EGP 32.4 per dollar ( 2.5 cents to 65 cents), the highest since August, after the central bank devalued the currency for the third time in less than a year.

In the offshore market, derivatives traders have stepped up their bets that the pound will additionally drop above EGP 32 to the dollar in the next 12 months.

According to indicative pricing data compiled by Bloomberg, markets will likely read this as a possible sign that after many false starts, Egypt is finally ready to commit to a flexible exchange rate regime.

Egyptian sovereign bond prices jumped and Egyptian pound futures rose between 5.5% and 7% to 29.4 and 32.4 per dollar on Wednesday.

The Central Bank of Egypt allowed the pound to fall to EGP 26.49 per dollar earlier on Wednesday, from about EGP 24.70 per dollar.

Exchange rate flexibility was a key demand of the International Monetary Fund (IMF), which approved a 46-month, $3 billion bailout package in October.

Less than a year ago, the Egyptian pound was trading within a narrow range below EGP 16 to the dollar.