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Egypt bonds jump after latest currency devaluation

Person, Man, Adult REUTERS/Mohamed Abd El Ghany
Currency flexibility has been a key demand by the International Monetary Fund, which approved a $3bn financial rescue package in October

Egypt’s government bond prices jumped and Egyptian pound non-deliverable forwards (NDFs) climbed 5.5 percent to seven percent to 29.4-32.4 per dollar on Wednesday after the central bank devalued the currency for the third time in less than a year.

Egypt’s central bank allowed the pound to weaken to 26.49 to the dollar earlier from about 24.70 per dollar.

Currency flexibility has been a key demand of the International Monetary Fund, which approved a 46-month, $3 billion financial rescue package in October.

A year ago the pound traded in a tight range below 16 per dollar.

Egypt had been seeking the loan since March, after the economic fallout from the war in Ukraine aggravated a foreign currency shortage, causing a sharp slowdown in imports and a backlog of goods in ports.

“Whether this resolves the FX liquidity issues that Egypt has been facing will depend on whether we see significant FX inflows in the near term,” said Farouk Soussa of Goldman Sachs.

“Key is to unify the exchange rate, which will require eliminating the FX backlog and ensuring demand for FX is met going forward,” he added.