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Egypt’s sovereign dollar bond risk premiums have tightened to near 2021 lows amid the recent string of positive updates. This began with Egypt striking an investment deal with the UAE for $35bn. Post this, its 30% currency devaluation and subsequent 600bp rate hike, saw it secure an $8bn IMF deal. On top of this, the World Bank said it will provide $3bn to Egypt in funding support. Besides, Egypt is also expecting the EU to announce its support package soon. Last week, Egypt’s outlook was revised to positive by S&P with its ratings affirmed at B-. Analysts at Goldman Sachs note that the “combination of the policy shift and significant external financing has transformed Egypt’s macro outlook and will continue to support the investment thesis in Egyptian risk assets”.
In the chart below, we have compared the sovereign risk premium of Egypt’s 7.6% dollar bond due 2029 (issued in March 2019) vs. the closest comparable benchmark US Treasury 2.375% 2029s (issued in May 2019). As seen in the chart, the risk premium on Egypt’s bond has compressed to lows seen in 2021 of 538bp, prior to the spike in inflation from near 4% then to over 35% seen currently.
Egypt’s 5.25% bond due 2025 has recently been added on BondbloX and is available for trading in sizes of $1,000.