Aug. 20 (Bloomberg) -- Egypt’s benchmark eurobonds fell, pushing the yield to a seven-week high, after police arrested the head of the Muslim Brotherhood amid a crackdown on Islamists, hurting reconciliation prospects.
The yield on $1 billion of 5.75 percent debt due in April 2020 climbed 25 basis points to 9.42 percent as of 5:05 p.m. in Cairo, the highest on a closing basis since July 3, the day the army forced former President Mohamed Mursi out of office. The Egyptian pound weakened against the dollar in black market trading, while local investors pushed stocks higher as foreigners sold their holdings.
The struggle between Egypt’s Islamists and the military- backed government showed no sign of easing after claiming the lives of at least 1,000 people. Police arrested Mohammed Badie, the spiritual leader of the country’s biggest Islamist group, the Muslim Brotherhood, after Defense Minister Abdelfatah al- Seesi urged Islamists to join the government’s plan to steer the country toward democracy.
“The more the Muslim Brotherhood is persecuted by the state, the more likelihood there will be instability in the future,” said Anthony Simond, emerging-market investment analyst at London-based Aberdeen Asset Management Plc. “We’re stuck basically in limbo. The interim government cannot put through any of their potential policies to create jobs and improve the economy until they have calm on the streets.”
Egypt’s credit default swaps, contracts that insure the nation’s debt against default, jumped 38 basis points to 863, also the highest since July 3, according to data provider CMA. The dollar strengthened to 7.12 pounds in unregulated trading, a premium of 1.9 percent over the official price, according to the average of three quotes compiled by Bloomberg from dealers that operate foreign-exchange businesses in Cairo. The premium was 1.3 percent on Aug. 7, the lowest since Bloomberg started weekly surveys in May.
The benchmark EGX 30 Index of stocks gained 1.1 percent, the most since Aug. 5, to 5,386.76. The biggest companies, including Commercial International Bank Egypt SAE and Talaat Moustafa Group Holding, said in filings to the bourse that unrest wasn’t affecting their activities. Local investors bought a net 80 million pounds ($11 million) of shares as foreigners sold, according to exchange data.
The military’s ouster of Mursi, who was a senior member of the Brotherhood, has sparked almost daily protests by his supporters. About half of the country’s provinces, including Cairo, are under a night-time curfew and the central bank ordered lenders banks to close early this week.
The government’s local-currency borrowing costs rose yesterday following the violent breakup of pro-Mursi sit-ins in Cairo. Egypt’s record 200 billion-pound quarterly debt-sale plan is the nation’s primary means of funding a budget deficit that widened to about 14 percent of economic output in the year to June, from 10.8 percent a year earlier.
--Editors: Daliah Merzaban, Zahra Hankir