Egypt signs agreement with Euroclear to expand its domestic bond investors
Cairo, October 19 (Reuters) – Egypt has signed an agreement with Euroclear, Europe’s largest clearing house for securities, to create a cross-border connection with the Brussels-based institute, the Egyptian Ministry of Finance said on Saturday.
The agreement, signed at the Egyptian Embassy in Washington, DC, will combine the Egyptian government’s instruments for issuing debt in local currency with Euroclear through a central securities depository to be set up by the Egyptian government.
This will make the domestic Egyptian debt accessible to a larger number of foreign investors and is a step towards making the Egyptian debt eventually “euroclearable”, Euroclear said in a statement.
In April, Egypt signed a letter of intent with Euroclear to create the right market conditions for issuing government bonds in local currency. Finance Minister Mohamed Maait told Reuters last month that he expected Egyptian debt to become “euroclearable” in early 2020.
“This agreement will allow the market to maintain a large volume of liquidity and will lead to a decrease in borrowing costs, thereby lowering the yields on the debt securities and increasing the liquidity of local assets,” Maait said in the ministry’s statement.
The settlement of debts via Euroclear requires, among other criteria according to the Euroclear rules, a high degree of transparency and precise information on the size and structure of the debts to be issued.
In September, Maait said Egypt intends to issue international bonds valued at $ 3 billion to $ 7 billion in fiscal 2019-2020.
Stephan Pouyat, Global Head of Capital Markets and Fund Services at Euroclear, said the deal would help Egypt achieve its goal of reaching a broader international institutional investor base and lead to a “more solid capital market”.
Since the end of 2016, Egypt has agreed a three-year package worth 12 billion US dollars with the IMF, taking out large amounts of foreign loans. Analysts say it is facing a tough repayment plan. (Reporting by Yousef Saba and Ehab Farouk; writing by Mahmoud Mourad and Yousef Saba editing by Ros Russell)