Egypt’s benchmark government bonds slumped for a second day, sending yields to the highest in more than five weeks, as the death toll from the government’s crackdown on protesters climbed above 400.
The yield on the 5.75 percent notes maturing in 2020 rose 22 basis points to 9 percent at 11:27 a.m. in Cairo, the highest level on a closing basis since July 9 and taking the two-day surge to 68 basis points. Five-year credit default swaps, contracts insuring the nation’s debt, are up 50 basis points since Aug. 13 at 800 basis points, according to data provider CMA. That ranks Egypt among the 10-riskiest credits in the world. The bourse won’t open today after central bank orders to close the banks.
The Egyptian government announced a month-long state of emergency after police stormed two camps in the capital, where former President Mohamed Morsi’s supporters had congregated since the military overthrew him July 3. Officials said at least 421 people were killed and more than 3,500 injured in nationwide violence, while Morsi’s main backers, the Muslim Brotherhood, said the toll was many times higher.
“The market’s reaction to events like this is going to be hard and it’s going to be quick, at least until pressure on the street eases,” Souheir Asba, a frontier-markets strategist at Societe Generale SA in London, said by phone yesterday. “Closing of the banks and the bourse is disconcerting for investors because it may indicate that security forces are planning something even bigger and more violent.”
Night-Time Curfew
The government imposed a night-time curfew in at least 14 provinces in conjunction with the state of emergency declared by Interim President Adli Mansour. He authorized the army and police to take “all necessary measures” to restore security, according to an e-mailed statement. Vice President Mohamed El Baradei resigned in objection to the violence, according to a statement from his media office.
The benchmark EGX 30 Index of stocks slid 1.7 percent yesterday, the most among 94 gauges tracked by Bloomberg. The Egyptian pound was unchanged at 6.9889 a dollar yesterday. The bank closing delays a 6.5 billion-pound ($930 million) treasury-bill auction and a foreign currency sale.
All but two stocks in Cairo slumped yesterday as the violence prompted London-based Noah Capital Markets EMEA Ltd. to cut Egyptian equities to sell from neutral. Orascom Telecom Holding SAE (OTLD) dropped 1.9 percent, the most since July 24, to 4.54 pounds. The company’s global depository receipts in London advanced 2.8 percent today on low volume to $3.085 after a 6.3 percent plunge yesterday.
Getting Worse
It’s the first time the bourse closed since January 2011, the start of the revolt against former President Hosni Mubarak, when trading was suspended for almost two months. Trading will resume Aug. 18, the bourse said in a statement.
“We now believe that things in Egypt have the strong potential of getting much worse, pushing through the positive aura that has comforted local investors hoping for a business-friendly environment,” Emad Mostaque, a strategist at Noah Capital Markets, said in an e-mailed note yesterday.
Source :Bloomberg
