What Do Egyptian Bonds Know That Stocks Don't?

Tyler Durden's picture


Presented with little comment aside to note that Egypt's 2020 bond yields are up 42bps today to a record 10.65%, the 5Y CDS has surged to 925bps and yet the last few days have seen egyptian equity markets jump almost 10%. Is the thinly-traded local market being driven by US ETF-driven news-algo flows or is it all going to be ok after all?


Credit/Bond markets in Egypt are extremely worried - but not stocks...


and the EGPT ETF...


Charts: Bloomberg

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Wed, 07/03/2013 - 10:30 | 3717750 slaughterer
slaughterer's picture

Bonds are just in general sold all around the world.  

Wed, 07/03/2013 - 10:37 | 3717763 Dubaibanker
Dubaibanker's picture

Egypt was just downgraded to CCC+ on 9 May 2013 and to B- previously on Dec 2012......by our friendly rating agency S&P.

10.6% pa still doen't look convincing...it is nice but maybe some more decline there. At 12% to 13% maybe...but ever so slowly. US yields are like a killer shark these days on top.

Regardless of the coup they have 13.2% unemployment and 8.2% pa official inflation. with oil price rising and Egypt being one of the larger oil import nation, things look to get rough in the summer months ahead. Their official reserves are at just USD 16bn. No wonder they are CCC+ and their bonds are falling.........

Wed, 07/03/2013 - 10:54 | 3717852 Flakmeister
Flakmeister's picture

Only recently did they become a modest net importer of oil, their oil exports peaked in 1990 and slowly dwindled to nil by 2010...

They are however the worlds largest importer of wheat...

Wed, 07/03/2013 - 11:02 | 3717894 FieldingMellish
FieldingMellish's picture

I thought they were expecting a bumper crop this year. Maybe the turmoil will affect the numbers.

Wed, 07/03/2013 - 14:45 | 3719066 Dubaibanker
Dubaibanker's picture

My bad....oil imports was for Turkey not for Egypt. Duh!

Wed, 07/03/2013 - 10:35 | 3717764 gjp
gjp's picture

Couldn't think of anything that more perfectly encapsulates the current state of the world.  Egypt headed for political implosion and US equity traders buy up the ETF ...

Wed, 07/03/2013 - 10:49 | 3717822 FieldingMellish
FieldingMellish's picture

Egyptian market was up 5% and closed before the ETF even started trading. The ETF is following, not leading.

Wed, 07/03/2013 - 10:52 | 3717842 gjp
gjp's picture

Thanks for the clarification.  Still seems representative.  In general, when the world is selling due to real economic / political issues, it's always the US algos / masters of the universe that show up with piles of BennyBux to buy more for no good reason other than the money's free ...

Wed, 07/03/2013 - 10:53 | 3717846 FieldingMellish
FieldingMellish's picture

"Buy on the sound of gunfire."

Wed, 07/03/2013 - 11:09 | 3717942 HowardBeale
HowardBeale's picture

And it is the BennyBux that are causing these revolutions. That's some legacy there Ben; 10s of thousands of dead People all around the world. What a guy!

Wed, 07/03/2013 - 10:37 | 3717765 FieldingMellish
FieldingMellish's picture

It was locals who were buying the SM yesterday. Foreigners were net sellers. The local market traded about $80m yesterday, orders of maginitude higher than the ETF ever trades.



Wed, 07/03/2013 - 10:40 | 3717779 Flakmeister
Flakmeister's picture

I think Egyptian bonds, esp. those in Pounds have only started to crater...

Wed, 07/03/2013 - 10:44 | 3717791 Hedgetard55
Hedgetard55's picture

Check back tomorrow after Morsi's head is on a pike and there are 5,000 dead in the streets.

Wed, 07/03/2013 - 10:45 | 3717794 Quinvarius
Quinvarius's picture

I thought inflation was supposed to drop when bond yields rise.  That is what they say on CNBC.  It appears that which has never happened in history, is still not happening.

Wed, 07/03/2013 - 10:50 | 3717825 NoDebt
NoDebt's picture

I don't mean to be pollyannish about this, but the bonds are backed by the Egyptian government- not looking so good.  The stocks are ownership in Egyptian COMPANIES, which may fare a bit better through this, perhaps even see improvement once the blood is done being mopped off the streets.

Then again, this equation is definitely subject ot substantial revision without notice.  Up now, could be down again (and much more) tomorrow.  You have to be pretty brave to play an Egyptian EFT in either direction right now.

Where's Mohammed ElErian?  Isn't he about due for a TV appearance again?


Wed, 07/03/2013 - 10:53 | 3717849 Chief Falling Knife
Chief Falling Knife's picture

Along the same lines as what I was thinking, only you beat me by a rounded minute. 

Wed, 07/03/2013 - 13:34 | 3718720 andyupnorth
andyupnorth's picture

I just noticed that Mohammed El Erian is translated "Mohammed the naked" or "Mohammed is naked".  That's some funny blasphemous stuff!  I'd like to think that it was on purpose...

Wed, 07/03/2013 - 10:51 | 3717832 Chief Falling Knife
Chief Falling Knife's picture

Surely Egypt has some companies that specialize in war making equipment.  Somebody has to make all the bullets and RPGs that are going to be expended in the coming days/weeks. 

On the flip side, when most of those bullets and RPGs are going to be directed at the govt, you can understand why no one wants those govt-issued bonds at the moment.

Wed, 07/03/2013 - 12:14 | 3718285 Colonel Klink
Colonel Klink's picture

They hate us for our bonds!

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