Egypt's dollar-denominated government bonds fell after Moody's cut the country's credit rating from B2 to B3 late Tuesday.
The agency changed its outlook for Egypt to be stable from negative.
Egypt has continued to face a shortage of foreign exchange, despite allowing the Egyptian pound to depreciate sharply in the past few months.
It is expected that the country's headline inflation will accelerate further in January after surging to its highest level in five years last December, according to a Reuters poll.
The bonds dropped as much as 1.2 cents in the dollar, with the 2029 maturity falling the most to 81.233 cents at 08.45 GMT, according to Tradeweb data.
Egypt's net foreign reserves rose to $34.224 billion in January from $34.003 billion in December, according to the Central Bank.
On Monday, Egypt sold $1.06 billion in one-year dollar T-bills in an auction at an average yield of 4.9%, the central bank said.
Meanwhile, the Egyptian Ministry of Finance issued a statement responding to Moody's concerns.
Finance Minister Mohamed Maait confirmed that the government dealt positively with the concerns contained in Moody's report, despite integrated measures, policies, and measures taken by the government.
The minister pointed out that Standard & Poor's fixed Egypt's credit rating with a stable future outlook, especially in light of the commitment to the economic reform supported by the International Monetary Fund (IMF) with an agreement that extends to 48 months.
It would allow for economic growth prospects during the coming period and enhance the ability to obtain adequate financing to meet the country's external needs.
Maait explained that Egypt is implementing a national program for economic reform to ensure stable economic conditions, maintain financial discipline, and increase the competitiveness of the Egyptian economy.
The program complements what has been achieved in the past years, including the fiscal year 21-22, where the total deficit reached 6.1 percent of GDP, down from 6.8 percent in the year 20-21, and a primary surplus for the fifth year in a row amounted to 1.3 percent of GDP, in the fiscal year 21-22.
Moody's report indicates the possibility of raising Egypt's credit rating through the Egyptian state's implementation of reforms related to enhancing the economy's competitiveness and foreign direct investment flows.