Investor appetite for local debt has returned post-float: The central bank raised EGP 87.8 bn in a one-year t-bill auction on Thursday — receiving offers for almost 3x the amount sold. The bills were sold at an interest rate of 32.3%. It also sold EGP 14.2 bn worth of six-month t-bills. Prominent investment banks like Goldman Sachs, Citibank, and Morgan Stanley were among the investors, Asharq Business reported, citing an unnamed government official.

Foreign investors contributed heavily: International investors bought up USD 825 mn (c. EGP 40.7 bn) of the EGP 102 bn-worth of bills sold, according to Reuters.

Remember: A senior Finance Ministry official told us last week that a 30% or higher return on t-bills is squarely in the range that they’ve been told by foreign institutions would bring them back.

Driving the rally: The recent wave of reforms — EGP float and jumbo rate hike — paired with incoming liquidity from the Ras El Hekma agreement and the USD 8 bn IMF agreement has restored investor confidence in local debt.

A vote of confidence: HSBC said it is optimistic that Egypt’s economy can stabilize and return to growth following the recent policy measure, but thinks that it will take time for the EGP to “find its level” — seeing the exchange rate settling in the range of EGP 40-45 to the USD, HSBC said in a note seen by Enterprise.

Don’t get too excited: Growth will “take longer to turn, however, as fresh fiscal and monetary tightening take their toll and real wages stall,” the bank added.

Also helping: JPMorgan and Citigroup recommended buying one-year EGP t-bills, with Citigroup telling its clients to stop-loss if the EGP weakens to 60 against the greenback. Meanwhile, BlueBay Asset Management bought up local t-bills after five years of being wary — “We are constructive short term, because they’ve delivered pretty much everything apart from a cabinet reshuffle,” the firm’s EM head Polina Kurdyavko said.

We’re not expecting the hype to die anytime soon: Egypt is now offering the third-highest yield on local-currency bonds among 23 emerging markets tracked by Bloomberg. “The next trade probably is Egypt local,” the news outlet quoted Vanguard Asset Services’ Nick Eisinger as saying. “Now that the foreign exchange rate is cheaper, rates have risen and the funding outlook is stronger and not many people own Egypt local, we would buy local,” he added.

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