Demand for Egypt’s Eurobonds has strengthened following ex-army chief Abdul Fattah al-Sisi’s inauguration as president in early June.

But future growth will be reliant on the North African country securing a credit upgrade, Khalil el-Bawab, managing director at EFG Hermes Asset Management based in Cairo, tells MEED.

“Demand yields are expected to further drop, but the rally is almost over since a credit upgrade is required as a catalyst in the near future,” he says.  

According to newswires, yields on Egypt’s April 2020 Eurobonds fell to a low of 4.74 per cent on 9 June.

A fall in yield reflects a reduction in risk, with investors seeing Egypt as a safer and more stable market under Al-Sisi’s presidency.

El-Bawab suggests that a credit upgrade could be likely after the parliamentary elections later this year.

US ratings agency Standard & Poor’s currently rates Egypt at B-/B with a stable outlook, a rating affirmed in mid-May.

Egypt could also consider raising a new international bond, but that is not expected until after the parliamentary elections.

“Once there is a stable government, parliament and president in place the reaction is expected to be positive from the international, regional and local markets,” El-Bawab says.

International investor confidence in Egypt has been buoyed not just by the promise of stability the election of Al-Sisi brings, but also the large volumes of money flowing in from Gulf countries, which is increasingly taking the form of foreign direct investment rather than aid packages.