Egyptian dollar sovereign bonds jumped by about three cents on Monday, continuing the significant rise recorded on Friday, after Egypt signed an investment agreement with the UAE that would bring $35 billion to the country over the next two months.
Tradeweb data showed that dollar-denominated bonds due 2025 achieved the largest gains, rising by as much as 2.8 cents to trade at about 74.3 cents, its highest level in just over a year.
Analysts say that the deal in which the UAE obtained the rights to develop virgin lands on the Ras El Hekma Peninsula on the Mediterranean coast for $24 billion would alleviate the economic problems that Egypt is currently suffering from.
But they indicated that they are now waiting to see whether the government will seize the opportunity to implement reforms to stabilize the economy in the long term.
“Inflows will help fill Egypt’s external financing gap in the near term, paving the way for a more orderly devaluation and stimulating IMF financing,” Patrick Curran of the Telimer Research Group told Reuters.
Data from JP Morgan showed that the difference between the yield on Egyptian dollar bonds and the yield on US Treasury bonds, which are considered a safe haven – an indicator of risks that attracts investors’ attention – narrowed to 674 basis points, the lowest reading in about two years.
Prime Minister Mostafa Madbouly said when announcing the project in a press conference that Egypt remains committed to reaching a new agreement with the International Monetary Fund, which is expected to raise the value of an agreed-upon loan worth three billion dollars, according to Reuters.
He said that there were only a few steps left to conclude an agreement with the International Monetary Fund.
Barclays Bank indicated in a note that the agreement with the UAE should give impetus to the International Monetary Fund program and control the performance of the currency.
He added that the unusual size of the project indicates the UAE’s firm commitment to stability in Egypt as a whole.
Data on currency futures showed that markets have improved their expectations for a future devaluation of the currency. Non-deliverable Egyptian pound futures contracts for 12 months rose to 52.9 pounds to the dollar on Monday, compared to 64.55 pounds to the dollar on Thursday.
In the latest transactions, the price reached 30.85 pounds to the dollar.
