Foreigners Pour Billions into Egyptian T-bills despite Regional Tensions
Taarek Refaat
Foreign investors injected approximately 12 billion Egyptian pounds into treasury bills on Wednesday, defying market expectations amid ongoing geopolitical tensions between Israel and Iran. The surge in foreign demand signals renewed confidence in Egypt's economic stability, even as the broader region faces uncertainty.
The sharp influx of foreign capital came as a surprise to market observers following heavy foreign sales on Monday and Tuesday, which amounted to 6 billion and 23 billion pounds, respectively. On Wednesday alone, foreigners purchased over 16.2 billion pounds in Egyptian treasury bills, while selling just 4.6 billion pounds.
Mahmoud Nagla, Executive Director of Money Markets and Fixed Income at Al Ahly Financial Investment Management, said the uptick in foreign trading of short-term government debt reflects opportunistic strategies by investors seeking quick, secure returns in a volatile environment.
'These aren't exits,' Nagla explained to Al Arabiya Business. 'Foreign investors are actively rotating positions to lock in gains based on interest rate and exchange rate movements.'
He added that the relative de-escalation between Iran and Israel—without direct involvement from new parties—has helped calm investor concerns about spillover effects on Egypt's economy. However, he cautioned that broader regional escalation remains a risk.
Currency and Risk Sentiment Remain Resilient
The Egyptian pound has depreciated by roughly 2% against the U.S. dollar since the latest regional conflict erupted, with the dollar now trading around 50.8 pounds. Despite the modest decline in the local currency, Egypt's five-year credit default swaps (CDS) — a key measure of sovereign risk — have remained stable near 520 basis points, their lowest since February.
'This reflects improving investor confidence,' Nagla noted, attributing the stability in Egypt's sovereign risk profile to several factors: the disbursement of the final tranche of the International Monetary Fund loan, gradual interest rate cuts by the central bank, and continued implementation of structural economic reforms.
Cautious Optimism Amid Uncertainty
While short-term foreign trading is expected to continue in the secondary market, volumes may remain modest, dependent on currency and interest rate dynamics. Analysts warn that should the regional conflict intensify or expand, Egypt could still face indirect economic pressures, including on tourism, trade, and external financing.
Nevertheless, for now, Egypt appears to be reaping the benefits of macroeconomic stabilization efforts and disciplined fiscal reforms, which have helped reassure investors during a period of heightened regional volatility.
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