Egypt’s dollar bonds fell by over 2 points across the curve after the nation’s inflation came at 32.7% in March, its the fastest pace since 2017. While the pick-up in inflation was in part due to base effects, the recent drop in Egyptian pound is also said to be showing its impact on the economy. As per Cairo-based Naeem Brokerage, if Egypt allows the currency to depreciate by another 10% after Ramadan, annual inflation may reach 33-34% by end-June. The central bank only recently hiked policy rates by 200bp to 18.25% in a bid clamp down on inflation. Ever since the beginning of the Russia-Ukraine war, Egypt has devalued the pound three times.

Egypt’s bonds have been trending lower since February when it was downgraded to B3 from B2 by Moody’s citing “reduced external buffers and shock absorption capacity”.

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