The cost of debt insurance stabilized at its lowest level since last February.

 

Foreigners pump billions of pounds into Egyptian treasury bills

Foreigners pump billions of pounds into Egyptian treasury bills despite escalating tensions

Foreign investors pumped about 12 billion pounds into Egyptian treasury bills during trading on Wednesday, despite escalating geopolitical tensions between Israel and Iran, indicating that Egypt is no longer at risk.

The foreign purchases were a surprise, especially after strong sales during trading last Monday and Tuesday, which amounted to 6 billion and 23 billion pounds, respectively. Foreigners bought more than 16.2 billion pounds of treasury bills, compared to sales of 4.6 billion pounds on Wednesday.

For his part, Mahmoud Nagla, Executive Director of Money Markets and Fixed Income at Al Ahly Financial Investment Management, said that foreign trading activity in short-term government bills in the secondary market is the result of rapid trading operations targeting guaranteed gains.

Nagla explained that the foreign sales of government debt instruments during the past sessions cannot be described as exits, but rather as a reduction in investment weights and the implementation of buy-and-sell transactions at specific profit points linked to the exchange rate and interest rates.

He said, "The easing of tensions between Iran and Israel without the entry of new parties makes the repercussions less impactful on the Egyptian economy, which investors are currently aware of." He emphasized the possibility of the situation deteriorating and the negative impact on the local economy worsening if the war between other countries extends.

Nagla expected short-term trading activity in the secondary market to continue at limited volumes, depending on exchange rates and interest rates. The Egyptian pound has declined by about 2% against the dollar since the outbreak of the events, with the US currency trading around 50.8 Egyptian pounds.

Despite the decline in the Egyptian currency, the cost of insuring debt, or what is known as CDS (credit default swaps), for a five-year term has stabilized at its lowest level since last February, around 520 points. Nagla said that the decline in the cost of insuring Egypt's sovereign debt is a testament to confidence in the Egyptian economy and the decline in expected risks.

He attributed this to Egypt's disbursement of the final tranche of the IMF loan and the implementation of successive interest rate cuts on the Egyptian pound, in addition to the government's continued structural economic reform program, which has boosted confidence in the local economy.