Local and international banks and institutions offered to invest $5,208 in the dollar treasury bills auctioned by the Central Bank of Egypt (CBE) on Monday.
The CBE puts forward these bills on behalf of the Ministry of Finance.
The bank accepted $1.267bn of the liquidity offered with an interest rate of 3.54% to 3.59% and an average of 3.58%.
The CBE auctioned $1.25bn that will mature in one year’s time on 7 May 2017.
According to the CBE, the auction outcome will be used to pay the value of a similar auction put forward on 10 May 2015 with a value of $1.302bn.
The interest rate on this auction remained unchanged at the same level as the CBE’s latest similar tender in February.
The interest rate on the US dollar is decided in accordance with a number of factors, most prominently the volume of the US dollar’s liquidity in the market, the alternative investment opportunities available for the local and foreign financial institutions that invest in these bills, and the country’s credit rating.
The CBE started to offer the US dollar treasury bills on 30 November 2011, where the average interest rate on these bills in the first auction amounted to 3.87%.
CBE allows local banks and foreign institutions to subscribe for the US dollar with a minimum of $100,000 and its multiples.
Banks operating in the local market rely heavily on these bills to invest their dollar liquidity since it is a scheme guaranteed by the government with a good interest rate.
Further, the marker lacks other tools to invest this liquidity except for a small number of syndicated loans that are proposed irregularly, or investment in the international capital market, which is risky and has low returns.