Egypt dollar bonds, currency gain after multi-billion UAE deal
TLDR
- $24 billion investment deal between Egypt and UAE focuses on real estate development on Egypt's north coast, boosting international bonds and currency forwards.
- Abu Dhabi's ADQ to invest $24 billion in Ras El Hekma peninsula development, with $11 billion in existing deposits converted for prime projects.
- Analysts view deal as tackling Egypt's foreign currency shortage but raise concerns about structural reforms and long-term economic outlook.
The $24 billion investment deal between Egypt and the United Arab Emirates, focused on a real estate development project on Egypt's north coast, has had a significant impact on Egypt's international bonds and currency forwards. Following the announcement of the deal on Friday, Egypt's international bonds saw a surge, and its currency forwards strengthened further on Monday.
Egypt's sovereign dollar bonds experienced a significant increase, rising nearly 5 cents. This uptick in value follows similar gains observed on Friday, with many of Egypt's dollar-denominated bonds reaching their highest levels in around two years.
Furthermore, the spread of Egypt's international hard-currency bonds over safe-haven U.S. Treasuries, which serves as an indicator of the risk premium demanded by investors, tightened to 640 basis points. This marks the lowest reading since November 2021, according to data from JPMorgan.
Key Takeaways
As part of the agreement, the Abu Dhabi sovereign investment fund ADQ will invest $24 billion for the development rights of the Ras El Hekma peninsula on Egypt's north coast. Additionally, $11 billion of deposits already in Egypt will be converted for "prime projects" across the country. This deal is seen by analysts and investors as addressing some of Egypt's immediate economic challenges, particularly its chronic shortage of foreign currency. However, questions remain about the prospects for structural reforms and the long-term economic health of Egypt.
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