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Return on debt instruments hits 12-year high - Daily News Egypt

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Return on debt instruments hits 12-year high

Different reactions to interest rate, 2% raise in interest rate at CBE

According to an investigation by Daily News Egypt, the banking sector saw different varying reactions in the first week after the Central Bank of Egypt’s (CBE) decision to raise interest rates by 2%.

The monitoring of the rise in the return on treasury bills and bonds issued by the Ministry of Finance last week to record levels not previously seen in the Egyptian market for several years.

On the other hand, the response of the banks operating in the local market to the CBE’s decision is limited to the point where only the interest rate hike of some banks limited savings certificates at the basic rates of return of the CBE as well as deposits and savings accounts only.

Other banks disregarded the decision of the CBE and did not raise interest in any of their savings accounts.

Hisham Ezz Al-Arab, head of the Egyptian Banks Union and head of the Commercial International Bank (CIB), said in his remarks that the banks’ response to the central rate decision depends on the accounts of each bank. The cost of funds and the available lending opportunities.

According to the monitoring of Daily News Egypt, the yield of treasury bills issued by the government on 9 July 2017 and 13 July 2017 are the highest level since 2010, exceeding 22%.

The highest rate of return on notes for 91 days was 22.99%, the lowest yield was 18.56%, and the average yield was 22.5%. The highest yield on treasury bills for 273 days was 22.729%, the average return was 22.44%, and the lowest was 19.99%.

The highest return on 182-day bills rose to 22.42%. The lowest return was 20.949%, averaging 22.278%. The highest return on 357-day bills was 22.1%. The lowest yield was 21%, and the average was 21.993%.

The yield on treasuries jumped to a 12-year high, the average yield on 3-year bonds was 19.5%, and 19-year bonds rose to 19.2%.

the CBE’s average variable interest rate of 112-day trusts on Wednesday rose to 22.9%, the highest rate of 22.950 %, and the lowest price of 22.5%.

CBE reintroduced the mechanism after the floating of the pound, as part of the procedures to withdraw excess liquidity in banks to control high inflation rates.

The CBE’s fixed-rate deposit auctions also jumped in one week from 17.25% to 19.25% ahead of its recent rate hike.

For its part, the Asset-Liability Committee (ALCO) of Egypt’s largest bank, the National Bank of Egypt (NBE), decided on Thursday to raise interest rates on its savings accounts of all types by 0.5%, to be implemented in the beginning of August 2017. It also raised the interest on deposits with a duration of less than 6 months up by 0.75%.

The committee maintained the interest of savings certificates with a yield of 16% and 20% at their current levels.

Banque Misr’s ALCO, which is responsible for setting the interest rates of Egypt’s second largest public bank, decided on Wednesday to raise interest rates by a maximum of 1% on a limited number of savings deposits at the bank.

Banque Misr’s move included raising interest rates on some corridor-related banking products, savings accounts, and short-term deposits at varying rates ranging from 0.25% to 1%.

The bank kept the interest of savings certificates with a yield of 16% and 20% at the same levels, stressing that it is not affected at the present time.

Several other banks have made similar decisions to the two government banks, including the United Bank (UBEG), the Greek National Bank (NBG), the National Bank of Kuwait (NBK), the Arab Banking Corporation (ABC), Qatar National Bank (QNB), and the Industrial Development and workers of Egypt (IDBE).

In a statement issued by the Council of Ministers’ Information and Decision Support Center, the CBE denied reports that the banks had raised the interest rate on high-yield savings certificates, individual loans, and SMEs, following a decision by the Monetary Policy Committee to raise interest by 2%.

The CBE stressed that raising the interest rates on certificates of savings is in accordance with the vision and policy of each bank separately.

The rates of return applied to medium-sized projects by 7% and 12% will remain at the same rates unchanged to enhance their productivity, according to the CBE.

He pointed out that the SME initiative will not be subject to new interest rates, which will remain at the same rates of 5%.

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