The average yield on three-year T-bond dropped to 16.750% at Monday’s auction, from 18.573% at the previous auction, while the average yield on the seven-year T-bond dropped to 16.972% from 18.373% previously. Thin supply of bonds (the combined size of the auctions was only EGP500mn, a quarter of the amount sold a couple of weeks ago), as the Ministry of Finance limits the issuances to avoid locking higher interest rates on longer maturities is the key driver behind such a plunge in bond yields, in our view. This is also reflected in both auctions’ coverage ratios, which stood at 8.7x for the three-year bond and 6.4x for the seven-year vs. 2.2x average YTD. The sharp decline in bond yields contrasts with rising yields on treasury bills in the past week, as the market corrected after yields dropped close to pre-floatation levels. We expect bond yields to remain under pressure, in light of the reduced supply. (Reuters, Mohamed Abu Basha)