Nov. 26 (Bloomberg) -- Egypt’s pound weakened the most in a year and the government canceled a treasury-bond auction amid concern that planned rallies by pro- and anti-President Mohamed Mursi protesters may turn violent. Dollar bonds fell.
The currency, subject to a managed float, retreated as much as 0.3 percent, the biggest intraday decline since November 2011, before trading down 0.2 percent at 6.1025 at 1:52 p.m. in Cairo. The Arab country withdrew the auction of 1.5 billion pounds ($246 million) of five- and seven-year bonds and sold $1.72 billion of one-year dollar-denominated treasury bills today at an average yield of 3.08 percent, compared with 3.71 percent at the last sale in June. Bids at the auction were 1.6 times the $1.5 billion offered, central bank data showed.
Mursi issued a decree last week that shielded his decisions from judicial oversight and protected the constitutional- drafting panel critics say favors his allies. Violence that followed his decision could delay International Monetary Fund approval for a $4.8 billion loan for Egypt, state-run Ahram Online reported, citing a senior IMF official it didn’t identify. The president is set to meet leaders of the judiciary today to discuss ways to defuse the crisis.
“There’s fear the IMF deal maybe at risk and of possible violence tomorrow,” Nour Mohei-El-Din, assistant general manager for treasury at BNP Paribas Egypt, said by phone. The pound’s weakness led to “the right decision by the government to cancel the local-currency bond sale until the situation calms down. Reaching a compromise will likely bring yields down to pre-crisis levels,” he said.
The government’s borrowing costs rose yesterday with the nine-month yield climbing 30 basis points, or 0.3 of a percentage point, to a six-week high of 13.19 percent. The Finance Ministry doesn’t release data for canceled auctions such as today’s.
The yield on the 5.75 percent dollar bonds due in 2020 rose 12 basis points, or 0.12 of a percentage point, to 5.24 percent, according to data compiled by Bloomberg. That marked the biggest increase on a closing basis in two months.
The cost of protecting Egyptian debt against default for five years jumped 21 basis points today to 410, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately-negotiated market. That makes it the third-riskiest credit in the Middle East behind Iraq and Lebanon.
Egypt has raised $6.01 billion and 1.15 billion euros ($1.49 billion) from sales of foreign-currency treasury bills in the past year, according to data compiled by Bloomberg. The sales have helped boost foreign currency reserves which have dropped by more than half since the start of the revolt that ousted Hosni Mubarak last year.