Citigroup likes Egyptian debt: Bulge bracket stalwart Citigroup thinks our geopolitical importance (we’re ‘too big to fail’) and an accelerating privatization program mean it is worth taking a punt on our USD-denominated debt, Bloomberg writes, picking up on a Citi note by strategists Nikola Apostolov and Luis Costa.

Too important to fail: “While geopolitical risks are likely to weigh on the region in the coming months, in our view Egypt’s geostrategic position may reinforce its bargaining power with its multilateral and Gulf Cooperation Council creditors and catalyze increased new financing,” Apostolov and Costa write.

“Egypt sovereign risk sentiment might be at an inflection point,” they note, despite recent sovereign credit downgrades and delays in the IMF’s review of our USD 3 bn assistance program. Citi is going overweight on Egypt, Bloomberg’s Mirette Magdy reports, “while reducing its exposure” to underperforming Jordanian debt. The bank is recommending Egyptian bonds maturing in 2031 and 2050.

Egypt’s USD debt has been the region’s best performer since the outbreak of violence in Palestine and Israel on 7 October, according to the business information service.

But, there’s a caveat: Regional escalation of the war on Gaza or the failure of talks to secure additional funding wouldn’t be positive for our debt, Citigroup warned.

LAZARD ISN’T AS BULLISH-

Wealth managers at Lazard are investing an “unusually low” portion of their assets in high-yield bonds from emerging markets, describing debt in Egypt, Argentina, Kenya, and Nigeria as “of particular concern,” it said in a statement this month. The firm noted the surge in US bond yields and geopolitical uncertainty amid Israel’s war on Gaza as factors placing pressure on the EM asset class.

Sentiment is a pretty important gauge to watch right now: The government is reportedly seeking to increase its USD 3 bn loan program with the IMF to more than USD 5 bn, and there are growing expectations that the UAE and Saudi Arabia will at least roll over some USD 5 bn worth of deposits they have at the central bank.

Next to play the “Egypt sentiment” game: Fitch. The ratings agency is set to weigh in on 3 November, following S&P Global (which downgraded us last week), citing FX shortages and rising uncertainties about the sustainability of our debt sustainability, and Moody’s .

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