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Egypt Said to Lower Yield on $1.5 Billion Bond Sale (Update2)
Egypt Said to Lower Yield on $1.5 Billion Bond Sale (Update2)
Egypt lowered the yields it will pay investors after receiving $12 billion in orders for the North African country's first overseas sale of dollar bonds in nine years, according to bankers familiar with the transaction.
Thursday, April 22,2010 20:51
sfgate.com

Egypt lowered the yields it will pay investors after receiving $12 billion in orders for the North African country's first overseas sale of dollar bonds in nine years, according to bankers familiar with the transaction.

The country will sell $1 billion of 10-year notes to yield 5.75 percent and $500 million of 30-year bonds to yield 6.95 percent, according to one of the bankers, who declined to be identified because terms aren't set. Egypt earlier offered about 5.875 percent on the 10-year debt and 7 percent on the 30-year bonds, said another banker yesterday. It's the country's first 30-year bond, according to Reham El-Desoki, a senior economist at Beltone Financial in Cairo.

Egypt is selling securities after the extra yield investors demand to hold emerging-market securities rather than Treasuries sank to 2.309 percentage points April 15, the lowest level since December 2007. The government plans to reduce the budget deficit estimated at 7.9 percent of gross domestic product in the fiscal year starting July, from a projected 8.4 percent this year, Finance Minister Youssef Boutros-Ghali said March 4.

"The 30-year bond is partly to diversify the sources of financing and extend debt duration," said Mohamed Abu Basha, an economist at EFG-Hermes Holding SAE in Cairo. The budget shortfall is "mostly financed by short-term domestic" treasury bills, he said.

Lining Up

HSBC Holdings Plc and Morgan Stanley are managing the debt offering. Egypt received $10 billion in orders from investors for the 10-year securities and $2 billion for the 30-year bonds, said one of the bankers.

Governments and companies in emerging markets from Brazil to Turkey and Indonesia have raised $208.5 billion from debt sales so far this year, according to data compiled by Bloomberg. Indonesia sold $2 billion of 10-year bonds in January and Russia today priced $5.5 billion of bonds, the second-biggest emerging- market dollar debt offering on record.

The spread investors demand to own developing nation bonds over Treasuries narrowed 24 basis points this year to 2.50 percentage points, according to JPMorgan Chase & Co.'s EMBI+ Index. A basis point equals 0.01 percentage point.

The International Monetary Fund said this week advanced economies including the U.S., Germany and Japan will grow 2.3 percent this year, while emerging nations will expand 6.3 percent. Egypt's government projects the economy will grow more than 5 percent this fiscal year.

Egypt is selling new 10-year securities to refinance $1 billion of bonds maturing in 2011, EFG-Hermes' Abu Basha said.

Bonds Rally

The nation's debt is rated Ba1 by Moody's Investors Service and BB+ by Standard & Poor's and Fitch Ratings. The rankings are one level below investment grade. The government sold $1.5 billion of bonds in June 2001 and 6 billion Egyptian pounds ($1.1 billion) of five-year securities in July 2007, according to data compiled by Bloomberg.

Egyptian bonds have rallied. The yield on the 8.75 percent dollar note due July 2011 has dropped about 32 basis points this year to 1.99 percent as of 6:16 p.m., according to Bloomberg bond trader composite prices.

Egypt, a U.S. ally, will hold its presidential election by 2011. President Hosni Mubarak, who will turn 82 next month and has ruled the country since 1981, underwent a gallbladder surgery in Germany last month and speculation about his health has fueled a debate about who will succeed him at the helm of the most populous Arab country.

Opposition groups such as the Muslim Brotherhood have said the president is grooming his son Gamal, a former investment banker, to become president. Both father and son have denied the speculation.

Source

tags: Investors / Economist / Finance Minister / Opposition Groups / International Monetary / Lower Yield
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