The new instrument aims to diversify the financial sources and broaden investors base of governmental securities

Ministry of Finance confirmed the continuation of  zero-coupon bonds issuance estimated by EGP one billion before the end of the first quarter of FY 2013/2014, which will be offered on Tuesday(10/9/2013) through the main dealer system ,and the offering operation would be postponed due to technical problems in the relative  offering authorities .

A statement issued by the Ministry indicated that the zero- coupon bonds offering is within the plan of  financial sources diversification and widening  investors base which aims to decrease public debt cost and develop governmental stock market. There is a positive relationship between both targets, whenever the offering market is being developed and its liquidity levels rise , the issuance incentive of the governmental securities decreased,  accordingly cost and burden of public debt decrease.

Ministry of Finance assured that Public Debt Management Unit at the Ministry introduced the operation of zero- coupon bonds offering in the timetable of the governmental securities issuance during the first quarter of current FY 2013/2014 (July- September ) which was targeted to be issued last July. The new product will not be issued at its scheduled time due to the conditions  witnessed in Egypt and reduction of work hours .

The statement indicated that the idea of zero-coupon bonds is based on non-existence of fixed interest rate as traditional bonds ,but it depends on the gap score between the nominal value of due bond and the actual value paid by investor when buying the bond , also the investor gets his profits  through the gap score between the nominal value and the bond payment value ( sale price ), such gap score  represents the return achieved by investor , it is known in deduction instruments such as treasury bonds.   

For the zero-maturity bonds, the Ministry declared that it has designed a Zero – Coupon bond for a period of 18 months to fill curve gaps of governmental securities yield, so that the Zero-bonds becomes as a connecting point between short –term treasury bills and short and long term treasury bonds, which serve pricing of government securities and increase liquidity.

Ministry of Finance confirmed that such Zero- bonds will be issued by “the main dealers system “ through the Central Bank of Egypt as usual and it will be traded in the secondary market through monitors of “the main dealers system “of the Egyptian Stock Exchange, provided that the central depository and registry will be occurred in Misr for Central Clearing of Depository and Registry such normal treasury bonds