Egypt Raises Repo Offering

Egypt’s central bank will offer 18 billion Egyptian pounds ($3 billion) of seven-day repurchase agreements, 29 percent more than last week, after the government increased short-term borrowings.

The repo offering comes a day after the Finance Ministry exceeded its goal in the sale of three-month treasury bills by 36 percent as it sought to stem yield gains on longer-term securities. Three-month notes yielded 13.83 percent, down 12 basis points from the previous auction. That compares with an average yield of 15.386 percent on nine-month bills, the highest since Bloomberg started tracking data in 2006.

The repo agreements allow holders of government securities to sell them back to the central bank to access funds for a week at 9.75 percent. The political instability that followed the ouster of former President Hosni Mubarak almost a year ago prompted foreign investors to retreat and drove up Egypt’s local borrowing costs more than 40 percent in 2011 as the state turned to domestic banks to meet its funding needs.

The central bank started offering repurchase contracts last March to help ease funding pressure on banks, whose holdings of government securities rose 31 percent in the first nine months of the year. Last week, the central bank offered 14 billion pounds of repos. The yield on the government’s 5.75 percent 10-year dollar bonds due April 2020 rose for a second day, gaining 15 basis points, or 0.15 of a percentage point, to a record 8.52 percent at 11:25 a.m. in Cairo. The pound was little changed at 6.0396 a dollar.