Egypt’s sovereign dollar bonds fall, reversing gains on Saudi visit

Egypt’s sovereign dollar bonds fell as much as 1.4 cents on Tuesday, eroding most of the gains made on the back of optimism around a visit from Saudi Crown Prince Mohammed bin Salman last week.

Many analysts had expected an announcement of fresh Saudi investment into Egypt, but bin Salman left without announcing any firm commitments.

The 2059 maturity on Egyptian Eurobonds was bid at 74.73 cents on the dollar, down 1.4 cents on the day and more than 3 cents below the level hit on Oct. 16, after bin Salman’s visit, Tradeweb data showed.

Egyptian media in recent months have carried reports of possible Saudi sovereign investments at Ras Banas along the Red Sea coast and Ras Gamila near Sharm el-Sheikh on the Sinai peninsula.

In February, Egypt sold the rights to develop real estate on its Mediterranean coast to UAE sovereign fund ADQ for $24bn.

The UAE sale paved the way for an $8bn financial reform programme package that Egypt signed in March with the International Monetary Fund.

The IMF package, which unlocked billions of dollars of additional funds from the World Bank and European Union, requires Egypt to reduce subsidies on fuel, electricity and other commodities and to allow its currency to float freely — measures that have left many Egyptians seething.

On Sunday, Egyptian President Abdel-Fattah al-Sisi warned that Egypt may be forced to re-evaluate the programme if international institutions did not take into account the regional challenges it is facing.

The region’s turmoil had caused Egypt to lose $6bn to $7bn in revenues the last seven to 10 months, a situation that could continue for at least another year, Sisi said.

Attacks on Red Sea shipping by Yemen’s Houthis have diverted traffic from the Suez Canal, causing revenue from the waterway to fall to $1.83bn in the first half of the year from $4.78bn a year earlier.

Egyptian officials are attending IMF and World Bank meetings in Washington this week, when they are expected to hold talks with the two institutions.

Bin Salman and Sisi’s meeting focused more on regional diplomatic issues than on investments, two Egyptian security sources said.

The two leaders nonetheless signed an agreement to encourage and protect mutual investments and oversaw the signing of an accord for a council to deepen economic ties.

Separate private Saudi investment deals will inject $15 billion into Egypt’s economy, the head of the Saudi-Egyptian Business Council told Al-Arabiya TV after last week’s visit.