Egypt cancelled Monday's 5-year treasury bond issue, the first cancellation of any treasury sale since August 2014, in what bankers said was a signal to the market that the finance ministry would not let yields rise too high. Bankers say state-owned banks had been suppressing yields at auctions in order to keep government borrowing costs from rising but in the last three auctions yields have jumped. The average yield on the 10-year bond jumped more than 21 basis points to 15.999 percent on Monday from 15.788 percent in the previous auction on Feb. 15, the finance ministry said, signalling expectations of an interest rate hike next month. "They are trying to send a signal to the market that they will not let yields go overboard. If they see yields that are two high they will not accept and so at the next auction the bids will be lower," one banker told Reuters. The Central Bank of Egypt's Monetary Policy Committee (MPC) is set to meet on March 17. The MPC kept its key rates on hold at its last meeting on Jan. 28. It had previously raised rates by 50 basis points on Dec. 24 but it did not prompt a rise in government treasury yields. Bankers say the base rate increase was beginning to feed into the bond market, with state-owned banks either unable or unwilling to bid rates down. Monday's jump in yields follows significant rises in Egypt's three-month and nine-month treasury bills on Sunday and in the six-month and one-year treasury bills on Thursday.
