Yields on bonds jumped by up to 130bps in yesterday’s auction, following a similar jump in yields on treasury bills on Thursday. The average yield on the three-year T-bond rose to 18.258% at Monday’s auction from 17.037% on 17 October, while the yield on the seven-year bond rose to 18.732% from 17.419% previously. The jump came after a Reuters story suggesting the Central Bank of Egypt had asked a number of banks to move their investments in T- bonds to held-to-maturity, with the market reading this as a clear hint of an upcoming sizeable hike in interest rates. The jump in yields in the following auction last Thursday was followed by the Ministry of Finance cancelling the auctions for three and nine months bills on Sunday before accepting bids yesterday on the bonds and allowing for a large jump in yields. We expect yields to remain on an uptrend, as the CBE approaches an EGP adjustment, which would require a notable increase in interest rates (c300bps according to our forecasts). This is especially so with a looming cut in subsidies likely to drive inflation higher. (Reuters, Mohamed Abu Basha)