Egypt has officially returned to international debt markets with its first USD bond issuance in nearly two years, issuing USD 2 bn in 5- and 8-year bonds, according to a disclosure by JPMorgan Securities to the London Stock Exchange. The bonds carry an initial trading range of 9.75-10%, with the price expected to drop 1 to 2 percentage points below the indicative yield at trading, a senior Finance Ministry official told EnterpriseAM.

The timeline: The bonds will trade with a price stabilization period beginning yesterday and running through 28 February, with an additional 5% worth of bonds on the table to be allocated if desired.

We saw this coming: Last week we were the first to report that the Madbouly government was planning a jump back into international debt markets within weeks, with the government seeking to take advantage of rising investor interest in Egyptian debt.

Remember: The government last issued eurobonds in late 2021, selling USD 6.75 bn in bonds across two issuances in February and September. Since then, high global interest rates and domestic currency market instability have discouraged the issuance of USD-denominated debt on international markets, with the only exception a USD 1.5 bn sukuk issuance in February 2023.

This issuance has been months in the making: Finance Minister Ahmed Kouchouk reportedly told investors in London back in September that Egypt aimed to issue USD 3 bn in eurobonds and other debt instruments by the end of the fiscal year this coming June. The government has planned to use a diverse array of debt instruments — including phased issuances of eurobonds, sukuk, and bonds backed by guarantees from institutions like the IMF — in order to reduce borrowing costs.

The story also caught the attention of the int’l press: Bloomberg.

FURTHER ISSUANCES COULD INCLUDE A USD 1.5 BN SUKUK OFFERING-

What’s next? Our source told us that they expect another issuance in the spring — likely a USD 1.5 bn sovereign sukuk offering — as there is currently market appetite for such instruments. The next fiscal year may also see Egypt issue its first social bonds in 4Q 2025, the source noted.

The gov’t is eyeing renewed passive flows: Egypt also aims to rejoin JPMorgan’s widely-tracked emerging-market sovereign bond index next year as part of a strategy to extend average debt maturities to 4-5 years, according to the source. Rejoining the index could also bring new passive flows into a local debt market that has until this point seen new portfolio inflows dominated by investment in short-term T-bills.

It’s all about safeguarding against another FX crisis: FX liquidity has improved significantly since Ras El Hekma, with the proceeds of the agreement — and others — helping settle a portion of our debt and supporting increases in our net international reserves and net foreign asset position, HC Securities’ Heba Mounir told EnterpriseAM. “However, as long as we have a trade deficit, we will continue to have a financing gap — and the government wants to avoid a repeat of the severe FX shortage that Egypt experienced in the last few years. It’s all about improving our FX liquidity to be able to pay off our external debt, and this issuance will help the government to pay off its debts with a longer maturity until our FX inflow improves.”

ICYMI: Kouchouk stated earlier this month that the government aims to reduce Egypt’s debt-to-GDP ratio to 85% by the end of this fiscal year, with the government also set on decreasing the external debt by USD 2 bn annually in order to bring the debt within sustainable levels.

ADVISORS- Our friends at HSBC are managing the transaction alongside JPMorgan, Citigroup, Goldman Sachs, Standard Chartered, and Sumitomo Mitsui Banking Corporation.

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