Unpopular Egyptian central bank decision increases yields on treasury bills
Yields on Egyptian three- and nine-month treasury bills climbed on Sunday and the auction's size was reduced after a new central bank decree limited the amount of funds that banks can channel into money market funds to buy T-bills.
The central bank said it had sold only 3.5 billion Egyptian pounds ($501.7 million) of T-bills instead of the 6 billion pounds it originally offered.
Egypt's central bank, worried that banks were investing too much of their cash in local money market and fixed income funds, said banks would not be able to invest more than 2 percent of their Tier One capital in the funds, down from the previous 5 percent.
A lack of demand after the decree was issued last week prompted the central bank to cancel an auction of six- and 12-month bills on Thursday, dealers said.
Treasury bill yields had already been rising before the decree, partly on concern that liquidity was drying up at banks.
The average yield on 91-day treasury bills rose to 14.288 percent from 13.927 percent at last week's auction, while that on 273-day T-bills climbed to 15.080 percent from 14.703 percent, the central bank said.
The bank said it had sold 1.5 billion pounds worth of 91-day T-bills and 2.0 billion pounds worth of 273-day bills.
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