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Daily Economic Update
28.08.2025Egypt: The Central Bank of Egypt’s MPC to convene today with the market expecting a cut of at least 100 bps. The Central Bank of Egypt’s Monetary Policy Committee (MPC) will convene today to decide on whether to cut interest rates or to keep them unchanged. Markets are almost unanimous in expecting the MPC to make another cut after the recent deceleration in the inflation rate and the expected stable trajectory for the remainder of the year. The MPC decided to keep rates steady at its last meeting in July after cutting them by a cumulative 325 bps in the prior two meetings in April and May. Egypt still maintains one of the highest real interest rates among emerging markets, as well as one of the most attractive carry trades on domestic sovereigns. These factors point to a potential rate cut in the range of 100-200 bps, especially with three remaining meetings this year, giving the MPC members more scope to consider developments at the regional and international levels.
Egypt: Government to incentivize large-scale IPOs in boost for privatization program. The Egyptian government is considering granting incentives for large-scale IPOs on the stock exchange to encourage companies to list. The finance minister stated that these incentives will contribute to increasing market depth and liquidity, reflecting the state's commitment to expand the ownership base and attract more local and foreign investors. The proposed plan will be in coordination with the Financial Regulatory Authority and the stock exchange.
Global: Long duration sovereign yields rising amid broader fiscal sustainability concerns and other challenges. Sovereign benchmark yields on long duration bonds (30Y) have been rising across most developed countries to often decades-high levels, driven by worsening fiscal and debt burden situations amid insufficient political will to rationalize the public finances. Yields on 30Y government bonds have steadily risen for the US (to around 4.9%, not far from the current cycle peak), the UK (around 5.6% - near the highest level since the late 1990s), Germany (around 3.3% - near the highest since 2011), France (around 4.4% - near the highest since 2009) and Japan (exceeding 3.1% - near record-highs). In the US, rising government debt-to-GDP (around 100% currently), the passage of an expansionary fiscal bill (One Big Beautiful Bill), fresh inflationary pressures due to tariffs, and the Trump administration’s attempt to undermine the Fed’s independence have all contributed to a steepening of the yield curve despite anticipations of further policy rate cuts by the Fed. The current term premium (30Y versus 2Y) is also near its highest since 2017. In the UK’s case, rising pressure on government finances amid a weak economic environment and increasing supply of government bonds (public debt to GDP already around 100%, near the highest since 1960s) at a time when the BoE is shrinking its portfolio of government securities, have made bond markets jittery. In Germany, despite having relatively modest sovereign debt levels (around 60% of GDP), an anticipation of sharp increases in government borrowings to fund its plans of boosting defense and infrastructure spending have sent yields sharply higher. France, meanwhile, which has one of the highest government debt-to-GDP ratios in the EU, has seen several government crises recently, with the current government on shaky grounds. The current spread of around 1.1% on France’s 30Y bonds over Germany’s is also close to its widest since 2012. Finally, long-term bond yields in Japan have also been increasing (please see below) and are at near record-highs.
Japan: Ministry of Finance seeks record-high allocations for debt financing as bond yields soar. The Ministry of Finance has submitted a record-high budget request of around JPY32 trillion ($219 billion) for debt servicing in FY26. This is an increase of 15% on the previous fiscal year and underscores the mounting fiscal pressures arising from the country’s debt levels and the surge in Japanese Government Bond (JGB) yields. The budget proposal arrives at a politically-sensitive moment, following the ruling coalition’s loss in July’s Upper House election. The government faces increasing demands to provide economic relief through proposed cash handouts or tax cuts, while simultaneously pursuing the expanding of defense spending. The 10-year JGB yield recently reached its highest level since 2008 (exceeding 1.6%) while the 30-year yield reached highs not seen since 1999 (exceeding 3.1%) amid the Bank of Japan’s (BoJ) efforts to reduce the size of its balance sheet (through scaling back bond purchases) and weak demand from major financial institutions.
Oil: Prices up on Wednesday after US imposes secondary tariffs on India. Brent closed at $68.1/bbl yesterday, up 1.2% (-8.8% ytd) after the US raised import duties on Indian goods from 25% to 50% as the deadline for the imposition of secondary tariffs for buyers of Russian crude came into effect. Thus far, there has been little in the way of signaling that India will deviate from purchasing Russian crude; Indian refiners are expected to continue buying Russian crude, which is typically discounted by $5/bbl (Urals, excluding shipping) compared to Brent (dated), with, therefore, little likelihood of supply disruptions. Meanwhile, a bullish weekly oil inventory report from the US Energy Information Administration (EIA) helped bolster sentiment, with commercial crude and gasoline stocks dropping by 4.2 mb and 1.2 mb w/w, respectively, in the w/e August 22, painting a strong demand picture ahead of the US Labor Day weekend.