Egypt Sells $3 Billion of Bonds in Rush to Beat Fed Taper

The issuance was three times oversubscribed, with total bids of $9 billion by more than 300 investors from U.S., Europe, Asia, Middle East and Africa, the Finance Ministry said Friday in a statement.

The sale included $1.125 billion of 6-year notes at a yield of 5.8%, $1.125 billion in 12-year notes at a yield of 7.3%, and $750 million in 30-year bonds at 8.75%. Demand from investors helped cut final yields on the 6 and 12-year notes by 32.5 basis points, and by 12.5 basis points on the 30-year bonds, the ministry said.

JPMorgan Chase & Co., Citigroup Inc., HSBC Holdings Plc, First Abu Dhabi Bankand Standard Chartered managed the transaction.

Emerging-market bond sales are springing back to life as governments seek to raise money while it’s still cheap. The past week shattered a summer lull for dollar- and euro-denominated debt, bringing $36 billion of issuance from governments and companies after the previous 10 weeks saw only $90 billion raised. Sales from Indonesia, Turkey, Chile, Serbia and Hungary were all met with robust investor demand.

“It makes sense to come now to the market to try to lock in lower rates ahead of the Fed’s soon-to-start tapering,” said Mohamed Abu Basha, head of macroeconomic research at Cairo-based investment bank EFG Hermes. “Appetite is still good for high-yielding issuers.” 

Federal Reserve Chairman Jerome Powell said Wednesday that tapering “could come as soon as the next meeting” adding that he didn’t expect to begin increasing interest rates until after the end of the tapering process, which would wrap up “sometime around the middle of next year.” The Fed is next due to meet around Nov. 2-3.

Egypt tapped international markets for $3.8 billion in dollar-denominated bonds earlier this year, with strong demand from investors bringing down the final yields on each of the notes it issued by 37.5 basis points.

The country’s external financing needs for the fiscal year ending in June range between $5 billion and $7 billion, according to EFG Hermes.

Source: Bloomberg Business News