Foreign inflows into Egyptian Treasury bills has narrowed the yield gap with Nigerian assets to below a percentage point for the first time in almost a year, according to data from the Bloomberg Terminal.
Nigerian assets missed out on a rally this year because of political chaos ahead of general elections next month. The yield on Egypt’s 12-month Treasury bill fell to 18.4 percent Tuesday, from almost 20 percent at the start of the year, while the yield on Nigeria’s security climbed 13 basis points this year to 17.5 percent Monday.
Traders are also happier with Egypt’s currency system, analysts say.
Markets see the Egyptian central bank’s decision late last year to end a repatriation mechanism guaranteeing foreign-exchange availability for overseas investors as a signal authorities are moving closer to a free float.
Nigeria, by contrast, has inexplicably pegged the naira to the dollar at N306/$ since mid-2017, which investors fear could lead to it becoming overvalued and raises the risk of a dollar
shortage should oil prices drop significantly.
Egypt “has a reform story,” said Parth Kikani, a director of fixed income at the Dubai-based Emirates NBD Asset Management, which has been overweight Egypt in the past two
years by investing in its Treasury bills.
“We see a lot of positives in the economy,” he said, adding that he sees Moody’s
Investors Service and Fitch Ratings following S&P Global Ratings in upgrading the nation’s debt ratings.
The Egyptian pound advanced the most in almost two years Monday as fund flows into the local Treasury bills market accelerated amid improving appetite for developing-nation assets.
