Egypt

Egypt’s underlying inflation pressures are much higher than the headline CPI numbers imply. Real interest rates have plunged. As such, domestic bond yields have stayed high for a reason. Steer clear.

Downward pressure on the pound will rise in the coming months. Inflation will go up, so will bond yields. It’s time to book profits on Egyptian domestic bonds.

After the significant devaluation of the pound, we now recommend going into Egyptian assets again.

Investors should book profits on our long Egyptian Treasury bill trade as the outlook for the Egyptian pound has worsened. The position has generated an 11.4% return in US dollar terms since its initiation eight months back.

The risk-reward profile of Egyptian domestic bonds are very attractive over the next six to 12-months. Go Long.

Executive Summary The Egyptian pound remains vulnerable to further devaluation due to a large external financing gap. Egyptian authorities are facing the “Impossible Trinity”. They cannot simultaneously determine the level of the exchange rate and set interest rates independently from the…