The Central Bank of Egypt (CBE) received 38 offers from local and foreign investors to invest $966.9m in a treasury bill (T-Bill) auction launched Monday.
The CBE launched an auction on Monday to offer $800m T-Bills for a period of 364 days, due on 5 January 2021. The proceeds of this tender will be directed to pay off a previous tender entitlement, which the CBE offered on 8 January 2019, at a value of $845.1m.
The CBE accepted 34 of these offers, valued at $864.9m, with an interest ranging between 3.52% as the lowest price, 3.55% as the highest price, and 3.54% as an average, compared to 3.55% as the lowest price and 3.6% as the highest price, and 3.589% as an average, on a similar tender on 9 December 2019.
Other offers with interest up to 3.57% were declined.
This is the first T-Bill auction in 2020. The CBE offered a total of six similar issuances in 2019, through which it obtained about $6.1432bn.
The CBE allows subscription in those T-Bills for both local banks and foreign institutions with a minimum subscription of $100,000 and their multiples.
The yields of these issuances are controlled by several indicators, the most important of which are the US dollar liquidity in the market, alternative investment opportunities available to banks and domestic and foreign financial institutions, and credit rating of the state.
The CBE said earlier that foreign investments in Egyptian pound-denominated bills fell to EGP 242.2bn in October against EGP 264.8bn in September 2019.
Foreign investments in T-Bills increased during the first 10 months of 2019 by about $4.25bn, or 39.7%, compared to $10.7bn at the end of December 2018.
Before its recovery in 2019, foreign investments in T-Bills declined by $10.8bn from the beginning of April 2018 to the end of the year, according to the CBE.
This type of investments reached about EGP 380.3bn ($21.5bn) at the end of March 2019.
The CBE announced earlier this week that foreign exchange reserves increased by $64m to $45.419bn at the end of December, compared to $45.354bn in November 2019. It is the highest-ever level in the history of Egypt, and covers imports for more than eight months.
The value of the CBE’s gold reserves increased by about $153m in December 2019, bringing it to about $3.301bn, up from about $3.148bn last November.
Even though, the CBE’s reserves of foreign currencies decreased to $41.84bn at the end of last December, compared to $41.93bn in the previous month.
While the balance of special drawing rights rose to $280m at the end of December, compared to $278m in November 2018, and the balance of the International Monetary Fund loans reached $3m in December, compared to $4m in November of last year.
The foreign exchange reserves at the CBE recorded unprecedented historical levels in 2019, as it jumped about $3bn to reach $45.419bn at the end of the year, compared to $42.61bn in January 2019.
The decision to liberalise the exchange rate contributed to the increase in foreign exchange reserve balances, as it increased from about $19.5bn at the end of October 2016, to over $25.5bn, currently.
Egypt’s access to strong cash flows and loans from abroad has contributed to an increase in the reserve size, most notably $12bn from the International Monetary Fund.
According to Tarek Amer, Governor of the CBE, the value of foreign exchange inflows reached about $200bn from the flotation date ( November 2016) until June 2019.
Egypt’s reserves consist of foreign currencies, gold, special drawing rights units, and net IMF loans.
The aim of the reserve is to support the currency, fulfil the country’s foreign obligations, and guarantee its imports of basic commodities for several months.
Most of the Egyptian reserves consist of the US dollar, the euro, the British pound, and the Japanese yen.
The size of the reserves of any country represents a source of strength or weakness according to its value and its ability to meet the country’s foreign exchange obligations.
The resources of the Suez Canal Authority, tourism, export, foreign investment and remittances of workers abroad are the most important resources for Egyptian reserves.