Cairo - Mubasher: A recent risk and reward analysis of emerging markets showed that Egypt is currently offering quite an attractive mix for fixed income portfolio investment.
“Egypt has higher yields while offering calculated risks on the Credit Default and Exchange Rate fronts,” according to a research note by Pharos.
“On the other hand, the matrix shows that both Argentina and Turkey are amongst the riskiest, which explains the yield premium,” the report noted.
Egypt has an advantage over other emerging economies, especially with the currency stability along with the recent upgrades for Egypt’s credit rating.
In Egypt, the average after-tax yield on the 12 month treasury bills has increased in the past two years from 12.56% in August 2016 to 14.74% in August 2018.
The range of yield movement for Egypt has not surpassed 600 basis points during that period.
On the other hand, the Credit Default Swap (CDS) on the Egyptian sovereign securities has declined in the past two years from 408.38 in August 2016 to 213.74 in August 2018.
“The drop in the CDS rate indicates that investors started to gain more confidence in the Egyptian economy and the government’s ability to repay debt,” Pharos explains.
“Furthermore, the Egyptian Pound exchange rate has been stable for more than a year now, facilitating overall return calculation, reinforced by a positive outlook on Egypt’s credit rating.”