Headline inflation cools again in October, ramping up expectations of a rate cut this week: Egypt’s annual headline inflation rate dropped for the fifth consecutive month to its lowest level in nine years, hitting 2.4% in October from 4.3% in September, according to Capmas data (pdf) released yesterday. Annual urban inflation decelerated to 3.1% from 4.8% the month prior. Reuters also has the story.

Prices of education goods and services soar as food and beverage inflation continues to cool: October inflation was primarily driven by a 28.9% y-o-y increase in the prices of goods and services in the education sector, including textbooks and stationery. Meanwhile, after being the key culprits of inflation over the past several months, food and beverage prices dropped 2.1% y-o-y. Pharos’ head of research Rada El Swaify had said last month that the government’s efforts to maintain food supply levels to put a cap on price volatility has helped inflation levels to beat expectations for several months.

We again have a high base effect to thank, but that factor could soon fizzle, Naeem Holding’s Allen Sandeep tells Bloomberg. He says that it remains unclear whether the CBE will maintain its aggressive easing cycle as the high base effect “should last just a few more months.”

Everyone and their mother has priced in a rate cut this week: Inflation hitting a new low has made it all the more likely that the CBE will move to cut rates again when it meets at the end of this week on Thursday, 14 November. Five of six economists we surveyed last week are calling a rate cut this week, El Swaify tells Reuters she expects a 100 bps rate cut, which Shuaa Securities’ Esraa Ahmed had also penciled in last week in our interest rate poll.

The dissenters: CI Capital’s Noaman Khalid tells Bloomberg he expects the CBE to keep rates on hold this week and at its next meeting on 26 December. Khalid warns that the central bank should slow down the pace of rate cuts to be able to correctly measure the impact its past easing decisions have had on the economy, while also leaving room down the road for more cuts if need be. Renaissance Capital had also told us last week it expects rates to remain unchanged on Thursday.

With inflation dipping again, Egypt’s real yield is still attractive to EM bond investors: Egypt is among the world’s most promising markets when it comes to the real interest rate on our bonds, topping an index for inflation-adjusted returns with a real yield of 9.42%, Bloomberg reports. According to the Bloomberg Barclays Local Currency Government Universal Index, our real yield is significantly higher than Turkey, number two on the list at 5.14%, and South Africa, which comes in third at 4.84%. Egypt’s YTD bond return rate is also among the highest on the index, at 25.78% — second only to Turkey’s rate of 30.02%.

Emerging market returns are increasing, while those in developed markets are at a low: Inflation-adjusted bond yields in developed markets are close to the lowest level they’ve been since 1997, Bloomberg says. In the last three months, emerging market bonds have gained 1.7%, spurred by optimism over a prospective trade agreement between the US and China, while developed markets have lost 1%. Egypt’s local currency sovereign debt has climbed by 0.4% last week alone, while Turkey’s is up nearly 1% and South Africa’s is up 0.9%. Slowing inflation in emerging markets has also boosted their attractiveness in terms of real yields, with extra real yields offered by emerging markets over developed markets standing at 302 bps in October — marking a five-fold increase from 2013. Fund manager Takeshi Yokouchi makes the case that now is the time to buy EM bonds “as inflation in many of the economies has slowed and more rate cuts are expected for some of them.”

What’s the difference between yields and “real” yields? To calculate a sovereign’s real rate of interest, the inflation rate is subtracted from the average monthly yield of 10-year local-currency sovereign debt.

M&A WATCH- CBE’s Amer tells NBG employees their “rights will be protected” in Bank Audi acquisition: Central Bank of Egypt (CBE) Governor Tarek Amer said that the rights of the National Bank of Greece’s (NBG) employees would be safeguarded if its acquisition by Bank Audi goes through, according to Masrawy. Speaking on the sidelines of an event last week, Amer attempted to assuage the employees’ concerns, saying the CBE has an “ongoing commitment” to protecting workers’ rights during mergers and acquisitions. Amer’s statement comes as CBE officials are due to meet this week with executives from Bank Audi and the NBG in a bid to resolve an employee compensation dispute that has blocked the execution of the Lebanese bank’s acquisition of NBG Egypt.

Background: The employees claim that they are entitled to severance pay if the transaction goes through, as they see the acquisition being tantamount to wrongful terminationunder article 122 of the labor law (pdf). The grace period granted to the two banks by the CBE in which to resolve the issue expired more than a week ago. NBG did not request an extension, which has threatened to bring the acquisition to a dead end. NBG and legal counsel at Matouk Bassiouny have told employees that no severance will be payable because staff members will maintain positions at the bank after Bank Audi completes its takeover.

INVESTMENT WATCH- ERC to invest EGP 15 bn in new marina complex in Sahl Hasheesh: Egyptian Resorts Company (ERC) is planning a large extension to the south of Sahl Hasheesh at an estimated cost of EGP 15 bn, CEO Wael El Hatow said. The 1.2 mn sqm project — on which ERC is expecting to break ground within one-and-a-half years and complete within eight— will add four or five hotels, 2k residential units, several commercial and service facilities, and a 330-yacht marina to the Red Sea town. ERC will finance the investment through a mixture of equity and new shares to unnamed local and foreign investors. No further details were provided.

PRIVATIZATION WATCH- Holding Co for Maritime getting its ducks in a row with int’l consultants — Is privatization beckoning? The Holding Company for Maritime and Land Transport is in talks with international consulting firms to evaluate its plans to restructure and merge a number of its subsidiaries, sources told Al Mal. According to sources, the Public Enterprises Ministry is looking to restructure the Suez Cargo Handling Automation Company alongside other companies handling foreign trade, freight shipping, and transport. The winning company will be given a 30-month period to restructure three of the selected subsidiaries. Out of the 20 firms that threw their hats in the ring, Brisk is the frontrunner, followed by Dutch advisory firm MTBS.

Background: The Public Enterprises Ministry has been on a privatization drive for the past several months, and said last month that it could offer private investors the management rights to three bus companies before merging them together. The move is partially modeled after state-owned Heliopolis Housing, which is offering management rights alongside a 10% stake sale as part of its plan to sell 25% of the company on the EGX. The government has also enacted legislation that would push privatization forward. Under proposed amendmentsto the Public Enterprises Act, private-sector companies would be allowed to own stakes of just under 50% in the ministry’s holding companies. The amendments would also introduce private sector-friendly board regulations by setting a cap on the number of government seats on the boards of state holding companies to seven.

New suspect in Russian airliner crash: A Lebanese Danish man named Basil Hassan, born Mohammed Basil El-Cheikh, has been implicated in the downing of the Russian airliner over Sinai in 2015, Danish public service broadcaster DR reported on Friday. DR obtained court documents from the “meat grinder bomb plot,” in which two Lebanese brothers were found guilty of attempting to blow up an Etihad plane flying between Sydney and Abu Dhabi. Khaled Khayat, one of the brothers, said during his confession that “there was also another plane that blew up in Egypt, and the same man was behind it [Hassan].” Daesh claimed responsibility for the attack, but so far no-one has been prosecuted.

Background: 224 people died after a Russian Metrojet was downed shortly after takeoff from Sharm El Sheikh in October 2015. Russian authorities have since grounded chartered flights to and from Egyptian Red Sea destinations, a ban that has cost us bns in tourist inflows. The ban has remained in place despite repeated inspections of Hurghada and Sharm El Sheikh’s airports indicating that security procedures are up to par. Russian officials have continually declined to give a timeline for the reversal. Last week, it was reported that a Russian delegation was in town to look into lifting the ban. Hopes were particularly high this time, given the British government lifted its own four-year ban just a few weeks prior. However, there is still yet to be anything concrete from the Russian government.

MOVES- Mahmoud Mohieldin to exit World Bank next year: Former Egyptian investment minister Mahmoud Mohieldin (bio) will leave his position as senior VP at the World Bank when his contract expires in January 2020, according to Al Shorouk. He has reportedly been nominated for a “senior international post” that will be announced in the coming weeks. Mohieldin, who joined the World Bank in January 2010, was previously rumored to have renewed his contractuntil October 2022.

EARNINGS WATCH- Etisalat Misr’s revenues rose 20% to reach EGP 10.6 bn in 9M2019, up from EGP 8.8 bn in the same period last year, according to financial statements seen by Al Mal. Mobile revenues during the period came at EGP 8.9 bn.

CORRECTION- In a story we published on Thursday on the chairman of Capital Securities Brokerage divesting his stake in the company, we incorrectly referred to the company as Cairo Capital Securities, which is a different company. We regret the error and have since corrected the story on our website.