The cost of insuring Egyptian debt fell dramatically yesterday in a sign that financial markets are growing less concerned about the implications of the political crisis.
The price on five-year Egyptian credit default swaps (CDS) fell 100 basis points. The swaps generally get more expensive when traders perceive more risk.
Insuring US$10 million (Dh36.7m) of Egyptian debt now costs $350,000, down from a high earlier in the week of $450,000.
Despite the declining swap rates, Moody's yesterday downgraded the ratings for five Egyptian banks, citing unrest in the country. The five banks were the National Bank of Egypt, Banque Misr, Banque du Caire, Commercial International Bank and Bank of Alexandria.
Hosni Mubarak, the president, said on Tuesday he would step down later this year, which was seen by traders as relieving some of the tension of recent days.
Some traders who had taken short positions in Egyptian CDS in recent weeks began to unwind them yesterday, which contributed to the fall in values.
But despite the drop in the cost of insurance, analysts predict plenty of challenges ahead.
Standard & Poor's yesterday became the third international ratings agency to downgrade Egypt's sovereign debt. S&P lowered the rating on Egyptian debt to "BB" from "BB-plus" and warned it could be cut further in the next three months.
Moody's Investors Service and Fitch Ratings also downgraded the debt in the past week as the civil strife peaked.
"If the political situation doesn't show signs of resolving, and certainly if the banks remain closed, then that's going to start to get more serious," said Richard Fox, the head of Middle East and Africa sovereign ratings at Fitch .
He said receiving information from the country remained difficult.
S&P noted that Jordan and Algeria were at the greatest risk of experiencing similar unrest.
"What we're seeing is to some effect contagion," said Kai Stukenbrock, the sovereign analyst for S&P. "Events in Tunisia have clearly encouraged people in Egypt to take to the streets, and the encouragement that people take from this can lead to some contagion.
"Whether this will lead to a domino effect in the region is a different question - a number of governments in the region have been relatively fast in acting proactively to lower food prices and increasing subsidies to alleviate the immediate economic pressure."
Mr Fox agreed. "I don't think you can just assume that you're going to have a domino effect from one country to the other," he said. "The fault lines are different in different countries."
rjones@thenational.ae
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
The specs: 2018 Genesis G70
Price, base / as tested: Dh155,000 / Dh205,000
Engine: 3.3-litre, turbocharged V6
Gearbox: Eight-speed automatic
Power: 370hp @ 6,000rpm
Torque: 510Nm @ 1,300rpm
Fuel economy, combined: 10.6L / 100km
Cryopreservation: A timeline
- Keyhole surgery under general anaesthetic
- Ovarian tissue surgically removed
- Tissue processed in a high-tech facility
- Tissue re-implanted at a time of the patient’s choosing
- Full hormone production regained within 4-6 months
Infobox
Western Region Asia Cup Qualifier, Al Amerat, Oman
The two finalists advance to the next stage of qualifying, in Malaysia in August
Results
UAE beat Iran by 10 wickets
Kuwait beat Saudi Arabia by eight wickets
Oman beat Bahrain by nine wickets
Qatar beat Maldives by 106 runs
Monday fixtures
UAE v Kuwait, Iran v Saudi Arabia, Oman v Qatar, Maldives v Bahrain
Is it worth it? We put cheesecake frap to the test.
The verdict from the nutritionists is damning. But does a cheesecake frappuccino taste good enough to merit the indulgence?
My advice is to only go there if you have unusually sweet tooth. I like my puddings, but this was a bit much even for me. The first hit is a winner, but it's downhill, slowly, from there. Each sip is a little less satisfying than the last, and maybe it was just all that sugar, but it isn't long before the rush is replaced by a creeping remorse. And half of the thing is still left.
The caramel version is far superior to the blueberry, too. If someone put a full caramel cheesecake through a liquidiser and scooped out the contents, it would probably taste something like this. Blueberry, on the other hand, has more of an artificial taste. It's like someone has tried to invent this drink in a lab, and while early results were promising, they're still in the testing phase. It isn't terrible, but something isn't quite right either.
So if you want an experience, go for a small, and opt for the caramel. But if you want a cheesecake, it's probably more satisfying, and not quite as unhealthy, to just order the real thing.
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STAR%20WARS%20JEDI%3A%20SURVIVOR
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Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
12%20restaurants%20opening%20at%20the%20hotel%20this%20month
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Dubai Creek Open in numbers
- The Dubai Creek Open is the 10th tournament on this year's Mena Tour
- It is the first of five events before the season-concluding Mena Tour Championship
- This week's field comprises 120 players, 21 of which are amateurs
- 15 previous Mena Tour winners are competing at Dubai Creek Golf and Yacht Club
