The cost of insuring Egypt’s debt just hit a record high: The country’s five-year credit-default swaps (CDS) are trading at a record discount to their one-year counterparts, Bloomberg reports — suggesting that investors are more worried than ever about the nation’s short-term default risk. Egypt’s one-year credit-default swaps rose 1k bps to 2.3k bps in April, while the five-year contract rose c.390 bps to 1.7k bps during the same month, the business news outlet reports. “The inversion in the credit curve is certainly indicative of the market pricing in a higher chance of near-term default risk,” said Columbia Threadneedle Investments analyst Gordon Bowers. Current bond prices suggest a 75% chance of default over the next 10 years and a 15% chance over the next six months, according to Tellimer calculations.

Remember: S&P Global last week became the last of the big three rating agencies to take negative action on Egypt, cutting its outlook to negative due to rising risks that the country will not be able to meet its external funding requirements.

Reform is key to reassuring investors: “The market is getting quite impatient on the lack of progress” in implementing the economic reforms Egypt has pledged to make as part of its USD 3 bn IMF assistance package, which include securing external financing through the privatization of state-owned assets, Bloomberg quotes Bowers as saying. The Financial Times is also reporting on the apparent delays in securing the investment that Gulf countries have pledged to Egypt.

Also worth knowing:

  • SoftBank wants to take British chipmaker ARM public in New York: SoftBank’s chipmaking business ARM has submitted the required documentation registering for listing on the US stock exchange, potentially marking this year’s largest IPO. (Reuters)
  • Hedge funds burned by tech rally: Hedge funds with short positions on tech have been caught out by last week’s rally, losing USD 18 bn after a string of positive earnings releases sparked a rebound in tech shares. Meta, Microsoft, Alphabet, and Amazon have all recorded strong earnings in recent days, prompting their shares to soar and helping S&P 500 to close the month up 1.5%. (Financial Times | Bloomberg)
  • EM hasn’t seen anything yet: That’s according to the world’s largest listed hedge fund, Man Group, which thinks the sell-off in emerging-market debt since February is about to get “much more violent.” (Bloomberg)
  • France downgraded: Fitch Ratings has downgraded France’s credit rating to AA- with a stable outlook, citing weak growth and recent social unrest triggered by Macron’s controversial pension reforms. (Fitch Ratings)

EGX30

17,797

+2.0% (YTD: +21.9%)

USD (CBE)

Buy 30.83

Sell 30.96

USD at CIB

Buy 30.85

Sell 30.95

Interest rates CBE

18.25% deposit

19.25% lending

Tadawul

11,271

-0.3% (YTD: +7.6%)

ADX

9,789

+0.4% (YTD: -4.1%)

DFM

3,545

+0.8% (YTD: +6.3%)

S&P 500

4,170

+0.8% (YTD: +8.6%)

FTSE 100

7,871

+0.5% (YTD: +5.6%)

Euro Stoxx 50

4,359

+0.03% (YTD: +14.9%)

Brent crude

USD 80.33

+2.7%

Natural gas (Nymex)

USD 2.41

+2.3%

Gold

USD 1,999.10

0.0%

BTC

USD 29,250

-0.4% (YTD: +77.1%)

THE CLOSING BELL-

The EGX30 rose 2.0% at Thursday’s close on turnover of EGP2.55 bn (about 42% above the trailing 90-day average). Local investors were net buyers. The index is up 21.9% YTD.

In the green: Ibnsina Pharma (+9.1%), Oriental Weavers (+6.9%) and AMOC (+5.5%).

In the red: CIRA Education (-3.0%), Ezz Steel (-1.4%) and Juhayna (-0.8%).

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