Egypt's reign as darling of emerging market debt could be ending

Egypt is losing ground as a top haven for emerging market debt investors, and interest rate cuts could make its short-term treasuries less attractive to foreign buyers in coming months, a report by CI Capital Asset Management said on Monday.

Egypt last year emerged as one of the world’s hottest destinations for portfolio investors after its short-term treasury yields touched 22 percent as the central bank hiked interest rates to curb soaring inflation.

The high-yielding debt brought hordes of foreign buyers and badly needed hard currency to Egypt, an import-dependent country that has relied on dollar inflows to fund its current account deficit in the absence of large foreign direct investment.

By December of last year foreign holdings of treasury bills surged to nearly $20 billion, up from just over $60 million in mid-2016, before Egypt floated its currency and agreed a $12 billion IMF loan programme that has helped lure back investors that fled after its 2011 uprising.