The Finance Ministry is set to issue EGP 5 bn in three-year local sovereign sukuk tomorrow, with settlement scheduled for Tuesday, according to auction data from the central bank.

This is the ministry’s first test of the debt market following the CBE’s 100 bps rate cut on Thursday. While the issuance is a re-opening of a series carrying a fixed coupon of 21.224%, tomorrow’s auction will give us all more detail on the market’s new pricing reality. With the CBE’s overnight deposit rate now down to 20.00%, banks and sharia-compliant funds are expected to bid aggressively to lock in these 21%+ returns before the government adjusts future coupons downward.

This fifth tranche brings the total count of sovereign proceeds to EGP 20 bn — but we need appetite for another EGP 180 bn by the end of the fiscal year. The sovereign sukuk program that launched in November is looking to raise EGP 200 bn by the end of June by tapping idle liquidity, namely Islamic banks and sharia-compliant funds that are cut off from traditional T-bills or bonds.

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