(Bloomberg) -- Egypt’s dollar bonds rallied to two-year highs Tuesday as investors speculated that a visit by Saudi Arabia’s Crown Prince Mohammed bin Salman will translate into fresh investments being pumped into the North African nation.
Long-term bonds rose more than 1.5 cents on the dollar, with notes due in 2061, 2059, and 2051 among the best performers in emerging markets. The move came after local media suggested multi-billion dollar deals were likely to be announced. Egypt’s state-run Middle East News Agency reported that President Abdel-Fattah El-Sisi and the crown prince will discuss a range of issues. There was no official confirmation about potential investments.
“Just the arrival of MBS in Cairo is enough to excite Egyptian asset prices, on the assumption he’ll be bringing billions of investment contracts with him” said Charlie Robertson, head of macro strategy at FIM Partners.
Investor appetite for Egypt’s assets improved early this year as the nation obtained commitments for more than $57 billion of flows from its lenders and bilateral partners. While an agreement with the United Arab Emirates to transform a pristine stretch of Mediterranean coastline into a tourism haven grabbed headlines first, it was followed by a series of measures including a currency devaluation and an interest-rate hike. All that revived investor confidence in the country and won it an expanded deal with the International Monetary Fund.
“There has been a lot of talk in the past six months that more investments may come. Today, we see that these investments will actually materialize. Hence, the market is rallying,” said Alexandru Ursu, a portfolio manager and trader at Neuberger Berman Asset Management.
Egypt has been one of the popular carry trades of the year, with a policy-rate differential of more than 20% over the US.
“We have been overweight in Egyptian bonds in recent years and we intend to keep our position,” Ursu said. “We think bonds will continue to perform well given strong support from the regional and international partners, government’s reform agenda and attractive yields.”
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