Cairo – Pharos Research expected that Egypt’s debt service cost will rise by EGP 32.5 billion per annum or 0.6% of gross domestic product (GDP) if the average yield on the government securities increased by 1% in fiscal year 2018/2019.
“Therefore, it is crucial to monitor the yield curve trend in the coming months to check if the government’s targets for FY18/19 budget will be feasible or not,” the research firm said in a recent report.
The average yield of the three-month bills went up by 12 basis points (bps) to 19.18% in the last bid, and it also rose on the six-month bills by 13 bps to 19.36%, Pharos highlighted.
Meanwhile, the average yield on the one-year bills rose by 10 bps to 19.19%, and it grew on the three-year bills by 38 bps to 18.18%, according to the report.
Moreover, the average yield on the five-year bills increased by 31 bps to 18.26%, whereas the average yield on the seven-year bills and the 10-year bills rose by 45 bps to 18.20% and 51 bps to 18.29%, respectively.
The North African nation’s yield curve slipped to 0.89% in the last bid, down from 1.28% in the bid before.
However, the short-term yield curve slope slightly flattened to 0.01% down from 0.02%, the report added.
“The main reason behind the recent yield increase is the decline in coverage ratio on government securities is the lower appetite by foreigners to invest in Egyptian treasury instruments,” the report concluded.