Yields on T-Bonds lose 0.85-1.38% after CBE's interest rate cut

Banks cut interest rates amid noticeable reservation so as not to affect their liquidity in local currency

The yields on treasury bonds (T-Bonds), launched by the Finance Ministry on Monday, fell by 0.85-1.38% following the Central Bank of Egypt's (CBE) interest rate cuts.
The CBE, on behalf of the Ministry of Finance, issued a 5-year and 10-year bonds of EGP 1.25bn each.
The CBE received 54 offers to invest in 5-year treasury bonds, worth EGP 3.595bn.
The CBE accepted only 16 bids of EGP 1.25bn with yields ranging between 14.6% as the highest price, 14.3% as the lowest price, and 14.446% on average, compared to 15.85%, 15.68%, and 15.815%, respectively, in the last similar auction launched on 13 August, before the CBE decided to cut interest rates.
Investors demanded an interest rate of 15.69%, which was rejected by the CBE.
In the 10-year bond auction, the CBE received 104 bids of EGP 4.138bn.
The CBE accepted only 50 bids worth EGP 1.25bn with yields ranging between 14.75% as the highest price, 14.35% as the lowest price, and 14.682% on average, compared to 15.6%, 15.48%, and 15.551%, respectively in the last similar auction launched on 13 August, before the CBE's rate cut.
Investors demanded an interest rate of 15.7% for their investment in the bonds, which was rejected by the CBE.
The interest rate on treasury bills (T-Bills) issued on Sunday fell by between 0.75-1.5%, bringing the average yield on 91-day T-Bills to 16.443% from 17.904% before the rate cut.
The average interest rate on 26-day T-Bills fell to 16.378% from 16.378%.
Last Thursday, the CBE decided to cut its basic interest rates by 1.5% to 14.25% for deposit, 15.25% for lending, 14.75% for the credit and discount rate, and the price of main open market operations.
Beltone Financial predicted that Egyptian T-Bonds and T-Bills would remain attractive, even after interest rate cuts, supported by the strong pound value and higher real interest rates due to slowing inflation.
In the same context, banks continued their moves towards reducing interest rates on their savings vessels on Monday, the second working days for banks after the decision to cut interest rates.
The Egyptian Arab Land Bank decided to reduce the interest rate of the three-year saving certificates with a quarterly return from 14.25% to 12.75%, and reduce the yield of the three-year certificate with a monthly return from 14% to 12.5%.
The bank also decided to reduce the return on the variable-interest certificate by 1.5%, and reduced the deposit interest on various terms by 1%.
Haitham Abdel Fattah, director of the treasury sector at the Industrial Development Bank, said that the interest rate on fixed certificates was cut by 1.5% to 12.5% instead of 14%.
He added that the bank also cut interest rates on premium accounts by 1.5%, while the return on regular and current accounts was not compromised.
CIB also cut interest rates by 0.75% to 3% on tranche savings accounts.
The bank decided to keep the interest rate on savings certificates unchanged at 10.5% on certificates with monthly return, 11% on certificates with quarterly return, 11.25% on certificates with bi-annual return and 11.5% on annual certificates.
The Housing and Development Bank decided to cut interest rates by 1% on savings and deposits and 1.5% on savings certificates.
The interest rate on the three-year tertiary reconstruction certificate decreased to 12.5% instead of 14%, and on the quarterly certificate with variable interest issued quarterly was decreased to 14% instead of 15.5%.
The National Bank of Kuwait – Egypt also decided to cut interest rates by 0.5% on saving accounts and fixed them on fixed-income certificates and deposits.