Could we see the Madbouly gov’t issue fractional bonds? The government is considering issuing fractional bonds to individuals, a portion of which will be allocated for Egyptian expats, a government source told EnterpriseAM. The move aims to stimulate the local debt market.

But first, what are the fractional bonds? They allow the government to sell debt in smaller, more accessible portions by opening the door for multiple individuals to invest in a single bond by purchasing a small quantity of the bonds on offer, bypassing the standard minimum investment amount. This flexibility makes it possible for investors to diversify their portfolio by acquiring stakes in more than one bond.

The government is working with Emirates NBD to finalize the implementation mechanism, in preparation for their rollout in Egypt, the source added. This comes as these bonds are gaining momentum in the UAE as a low-risk investment tool.

Retail market is already on the way: The government plans to launch a retail bonds market this year, a senior government source previously told us. This move will allow individuals, for the first time, the option of purchasing government debt instruments and reduce the government’s debt service payments. The move is pending ongoing amendments to the system governing primary traders.

What can we expect? The new debt instruments are intended to strengthen Egypt’s efforts to join the European clearinghouse Euroclear, the source said. By doing this, officials hope to attract further investors into the local debt market. This is expected to have a positive impact on the interest rates and reduce the burdens of debt services.

ALSO- Egypt intends to move forward with issuing its first EGP-dominated sukuk in the 2Q FY 2025-2026, another government source told us yesterday. The value of the issuance is estimated at EGP 3-4 bn and is to be issued in two tranches to measure investors’ appetite. The results will also provide officials with essential data for creating a clear and standardized pricing model for all future sharia-compliant debt instruments.

Not the first we hear of this: We were told last November that the government initially planned to issue its first EGP-denominated sovereign sukuk in the local market this fiscal year. A few months later, another source told us that the issuance was to be completed by March 2025.

REMEMBER- Egypt’s maiden sovereign sukuk issuance in 2023 raised USD 1.5 bn and was more than 4x oversubscribed. The issuance attracted interest from over 250 global investors from markets including the Gulf and East Asia, as well as the US and Europe.

IN CONTEXT- The Finance Ministry upped its local debt issuance plan for the first quarter of the current fiscal year to EGP 2.35 tn. This marks a substantial increase compared to the EGP 1.4 tn issued in the same period of FY 2024-2025, and is also higher than the EGP 2.2 tn issued in 4Q of the past fiscal year.

Tags: