The Ministry of Finance plans to issue treasury bills (T-Bills) and bonds (T-Bonds) of EGP 160.75bn during September 2019, as part of a government plan revealed by Daily News Egypt earlier, including offering debt instruments of EGP 522bn during the first quarter (Q1) of the fiscal year (FY) 2019/20 to bridge the budget deficit.
The Ministry of Finance’s plan shows that the government is targeting 16 T-Bills offerings of EGP 151bn and eight T-Bonds offerings of EGP 9.75bn.
The Central Bank of Egypt (CBE), which undertakes this task on behalf of the government, will issue four offerings of 91-day T-Bills of EGP 36.5bn, four 182-day offerings of EGP 37.5bn, four 273-day offerings of EGP 38.5bn, and four 364-day offerings of EGP 38.5bn.
The plan also includes two T-Bonds offerings of EGP 2.5bn maturing in three years, and two 5-year T-Bonds offerings of EGP 2.5bn, in addition to two 7-year offerings of EGP 2.5bn, and two 10-year offerings of EGP 2.25bn.
According to the Ministry of Finance, the outstanding balance of treasury bills and bonds owed by the government until the end of July 2019 amounted to EGP 1.97tn, of which about EGP 1.203tn are in bills and EGP 766.36bn are in bonds.
Banks working in the Egyptian market are considered the largest investors in treasury bonds and bills, which the government issues on a regular basis to cover the state’s budget deficit.
T-Bonds and T-Bills are proposed through 15 banks, which are the principal dealers in the primary market. These banks resell a portion of these bills and bonds in the secondary market to retail investors, as well as to local and foreign institutions.
The yield on treasury bills and bonds lost between 0.75-1.5% of their value last week, in the first reaction of the yield on government debt instruments following the CBE’s decision to cut its basic interest rates by 1.5%.
Beltone Financial predicted that Egyptian treasury bonds and bills would remain attractive, even after interest rate cuts, supported by the strong pound value and higher real interest rates due to slowing inflation.
It pointed out that among emerging markets with similar returns, Egypt is still characterised by improved macroeconomic indicators and GDP growth of +5%.
“We don’t expect treasury bills to reflect the policy of cutting interest rates completely for a long time,” Beltone stated.
But it sees pressure only in the coming weeks for auctions, which is a major support for the pound’s rise.
“We still expect treasury bonds’ yields to recover to the 16-17% range, after some pressure during the remainder of August to mid-September, regardless of the direction of interest rate policy,” Beltone said.