The High Probability of a Fed Rate Hike in December Lowers Demand for US Treasuries

Over the past week, the BLOM Bond Index (BBI) rose by 0.49%, to end the week at 103.94 points. The JP Morgan Emerging Markets’ Bond Index (EMBI) registered a close performance, increasing by a weekly 0.47% to 805.42 points. 

The BBI was boosted by higher demand for Lebanese Eurobonds maturing in 5 and 10 years as their respective yields slid from last week’s 6.20% and 7.02% to this week’s 6.05% and 6.92%.

Demand for US treasuries was down this week as Federal Reserve officials pointed to the high likelihood of a rate hike in December and as the US stock market recorded a strong performance.  

The lower demand for safe haven assets was shown by the rise in yields on the US Treasuries maturing in 5 and 10 Years from last week’s 1.89% and 2.31% to this week’s 1.94% and 2.35%.

The 5Y and 10Y spreads between the Lebanese Eurobonds and their US comparable fell from last week’s 431 bps and 471 bps to 411 bps and 457 bps, respectively.

5 Year Credit Default Swaps, Mid-Prices (in basis points)

  05/10/2017 28/09/2017
Lebanon 452 450
KSA 82 86
Dubai 144 148
Brazil 185 200
Turkey 175 188

Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields Weekly
Maturity Coupon in % 05/10/2017 28/09/2017 Change 05/10/2017 28/09/2017 Change bps
12/11/2018 5.15 100.25 100.25 0.00% 4.91% 4.91% 0
23/04/2019 5.5 100.65 100.38 0.27% 5.06% 5.24% -19
20/05/2019 6 101.38 101.25 0.13% 5.10% 5.19% -9
28/11/2019 5.45 100.38 100 0.38% 5.26% 5.45% -19
09/03/2020 6.375 102.25 101.63 0.61% 5.37% 5.65% -28
14/04/2020 5.8 100.5 100 0.50% 5.58% 5.80% -21
19/06/2020 6.15 101.25 100.75 0.50% 5.64% 5.84% -20
12/04/2021 8.25 107.88 107.38 0.47% 5.74% 5.91% -16
04/10/2022 6.1 100.13 99.5 0.63% 6.07% 6.22% -15
27/01/2023 6 98.75 98.13 0.63% 6.28% 6.42% -14
22/04/2024 6.65 100.25 99.63 0.62% 6.60% 6.72% -12
04/11/2024 6.25 98.13 97.38 0.77% 6.58% 6.72% -14
03/12/2024 7.00 102 101.5 0.49% 6.64% 6.73% -9
26/02/2025 6.20 97.38 96.88 0.52% 6.65% 6.74% -9
12/06/2025 6.25 97.38 96.88 0.52% 6.69% 6.77% -8
28/11/2026 6.60 98.38 97.88 0.51% 6.84% 6.91% -7
23/03/2027 6.85 99.75 99 0.76% 6.89% 7.00% -11
29/11/2027 6.75 98.75 98 0.77% 6.92% 7.03% -10
03/11/2028 6.65 97.25 96.63 0.64% 7.01% 7.09% -8
26/02/2030 6.65 96.75 96.38 0.38% 7.05% 7.09% -5
22/04/2031 7.00 98.25 98.25 0.00% 7.20% 7.20% 0
23/03/2032 7.00 97.63 97.5 0.13% 7.27% 7.28% -1
02/11/2035 7.05 97.25 96.75 0.52% 7.33% 7.38% -5
23/03/2037 7.25 97 96.25 0.78% 7.55% 7.62% -8

 

Leave a Reply

Your email address will not be published. Required fields are marked *