Egypt cancels debt auction as foreign investor appetite weakens

An employee of a money changer counts U.S. dollar notes for a customer at a bank in Cairo December 31, 2013. (Reuters)
Updated 17 September 2018

Egypt cancels debt auction as foreign investor appetite weakens

  • Data from the central bank showed it had called off the auction of 3- and 7-year treasury bonds worth 3.5 billion Egyptian pounds
  • Two previous T-bond auctions were canceled after bankers and investors demanded high yields on the debt

CAIRO: Egypt canceled a treasury bond auction on Monday, its third such move in as many weeks, as foreign investors cut their exposure to the country’s debt at a time of weak appetite globally for emerging market assets.
Data from the central bank showed it had called off the auction of 3- and 7-year treasury bonds worth 3.5 billion Egyptian pounds ($195.97 million). Two previous T-bond auctions, also for 3.5 billion pounds each, had been canceled after bankers and investors demanded high yields on the debt.
“The finance ministry has been canceling the bond auctions for the past few weeks due to higher yields than they are willing to accept,” said one banker at an Egyptian bank.
Bankers had been expecting yields of around 18.8 percent in Monday’s canceled sale, he said.
Egypt aims to reach an average interest rate on government debt instruments in the current 2018-2019 budget of about 14.7 percent compared with 18.5 percent in fiscal year 2017-2018, which ended on June 30.
Egypt’s funding needs in the 2018-2019 budget are about 714.637 billion pounds, of which 511.208 billion are in the form of domestic debt instruments and the rest are external financing from the issuance of bonds and an IMF loan.
Emerging markets generally have been shaken by an escalating trade war between the United States and China, as well as interest rate increases by the Federal Reserve which are attracting funds back to the United States.
Egyptian stocks fell 0.5 percent on Monday after slumping 3.6 percent on Sunday to mid-February lows in their biggest one-day loss since January 2017.
Allen Sandeep, head of research at Naeem Brokerage, noted the weakness across emerging markets.
“It shows that foreigners are cutting their exposure to Egyptian treasuries, but whether they are repatriating their dollars out of Egypt we still don’t know,” he said.
“August and September has been as bad as June in terms of lower foreign buying — there could be another $2-3 billion drop in total foreign holdings.”
Foreign holdings of Egyptian treasuries stood at $17.1 billion at the end of July, down from $23.1 billion at the end of March. ($1 = 17.8600 Egyptian pounds)


China's aviation regulator raised concerns with Boeing on 737 MAX design changes

Updated 12 December 2019

China's aviation regulator raised concerns with Boeing on 737 MAX design changes

  • China is reviewing the airworthiness of the plane
  • China was first country to ground plane in March

BEIJING: China’s aviation regulator raised “important concerns” with Boeing Co. on the reliability and security of design changes to the grounded 737 MAX, it said on Thursday, but declined to comment on when the plane might fly again in China.
China is reviewing the airworthiness of the plane based on proposed changes to software and flight control systems according to a bilateral agreement with the United States, Civil Aviation Administration of China (CAAC) spokesman Liu Luxu told reporters at a monthly briefing.
He reiterated that for the plane to resume flights in China, it needed to be re-certified, pilots needed comprehensive and effective training to restore confidence in the model and the causes of two crashes that killed 346 people needed to be investigated with effective measures put in place to prevent another one.
China was the first country to ground the 737 MAX after the second crash in Ethiopia in March and had set up a task force to review design changes to the aircraft that Boeing had submitted.
The US Federal Aviation Administration (FAA) will not allow the 737 MAX to resume flying before the end of 2019, its chief, Steve Dickson, said on Wednesday.
Once the FAA approves the reintroduction into service, the 737 MAX can operate in the United States, but individual regulators could keep the planes grounded in other countries until they complete their own reviews.
“Due to the trade war, the jury is still out on when China would reintroduce the aircraft,” said Rob Morris, Global Head of Consultancy at Ascend by Cirium.
Chinese airlines had 97 737 MAX jets in operation before the global grounding, the most of any country, according to Cirium Fleets Analyzer.