Egypt's Dollar-denominated Bonds Traded Higher in Secondary Markets

Egyptian dollar-denominated bonds traded on global stock exchanges rose on Jan. 16, coinciding with a decrease in the cost of credit risk swaps, following the ceasefire agreement in Gaza.

According to data, the cost of credit risk swaps for a one-year term fell to 3.19% compared to 3.54% in Tuesday's trading.

The cost of insurance contracts for a five-year term also fell to 5.41% compared to 5.74% on Tuesday. Insurance costs affect bond prices because they raise the risk premium that investors demand on Egyptian bonds.

As a result of the improvement, the price of Egyptian bonds rose on international markets. According to data from the Luxembourg Stock Exchange, the price of the bond due in January 2027 rose to 98.827 cents per dollar compared to 98.668 cents per dollar, which led to a decline in returns to 8.1% compared to 8.3%.

The yield on the 2047 bonds fell to 11.1% from 11.3%, while the yield on the longer-term 2061 bonds fell to 10.79% from 10.98% at the close of January 14.

The decline in yields on Egypt’s international bonds in secondary markets reflects the expected cost of upcoming issuances, which the Egyptian Minister of Finance estimated to be around $3 billion and will take place during the first half of this year. However, it does not affect the levels of interest paid on the debt at the present time, as all Egyptian bonds denominated in dollars or euros have a fixed coupon interest.

Investors’ view of the Egyptian economy’s prospects has improved, and that economic risks have declined, especially after reaching an agreement at the expert level with the International Monetary Fund (IMF) to disburse the fourth tranche of the program, subject to the approval of the Fund’s Executive Board, which has not yet put Egypt on its meeting schedule.