Demand on US Treasuries Retreated this Week amid Higher Inflation Prospects

The BLOM Bond Index (BBI) ended the week at 103.08 points, down by a marginal 0.06% when compared to January 25, 2018. As such, the BBI outweighed the JP Morgan Emerging Markets’ Bond Index (EMBI) which retreated by a weekly 0.26% to end the week at 805.76 points. 

The demand on 5 year (5Y) and 10Y Eurobonds steadied by Feb. 01, 2018, with their respective yields stabilizing at last week’s 6.05% and 6.96%.

Nonetheless, the 5Y and 10Y spreads between the Lebanese Eurobonds and their US comparable retreated from last week’s 364 basis points (bps) and 433 bps to 353 bps and 424 bps, respectively, owing it to the climbing yields of US treasuries.

In the US, the week carried a barrage of events which drove investors away from 5Y and 10Y US Treasuries. The respective yields climbed from last week’s 2.41% and 2.63%, to hit 2.52% and 2.72% by Feb. 2, 2018. In fact, throughout the week, Trump delivered his State of the Union speech; Janet Yellen announced keeping interest rates unchanged in her final meeting as FED chair, yet the FOMC anticipated inflation to rise and the economy to expand, which signaled hiking rates more aggressively with Powell’s new leadership. Moreover, concerned investors were awaiting the Labor Department’s latest jobs report due Friday. This last revealed total non-farm payroll employment rose by 200,000 in January 2018. As such, traders’ expectations regarding the FED’s more hawkish stance in the coming period were strengthened.

Weekly Change of Lebanese Eurobonds’ Prices

  Prices Weekly Yields Weekly
Maturity Coupon in % 01/02/2018 25/01/2018 Change 01/02/2018 25/01/2018 Change bps
23/04/2019 5.5 100 100.13 -0.13% 5.49% 5.38% 11
20/05/2019 6 100.6 100.75 -0.15% 5.51% 5.40% 11
28/11/2019 5.45 99.63 99.88 -0.25% 5.66% 5.51% 15
09/03/2020 6.375 101 101.38 -0.37% 5.86% 5.67% 19
14/04/2020 5.8 99.75 100.13 -0.38% 5.92% 5.73% 19
19/06/2020 6.15 100.5 100.75 -0.25% 5.92% 5.81% 11
12/04/2021 8.25 106.5 106.75 -0.23% 5.98% 5.91% 7
04/10/2022 6.1 99.88 100 -0.12% 6.13% 6.10% 3
27/01/2023 6 99.13 99 0.13% 6.21% 6.24% -3
22/04/2024 6.65 100.13 100.13 0.00% 6.62% 6.62% 0
04/11/2024 6.25 97.75 97.75 0.00% 6.67% 6.67% 0
03/12/2024 7.00 101.5 101.38 0.12% 6.72% 6.74% -2
26/02/2025 6.20 97 96.5 0.52% 6.74% 6.83% -9
12/06/2025 6.25 97 96.5 0.52% 6.77% 6.86% -9
28/11/2026 6.60 98.25 97.88 0.38% 6.87% 6.92% -6
23/03/2027 6.85 98.88 98.88 0.00% 7.02% 7.02% 0
29/11/2027 6.75 97.88 97.75 0.13% 7.05% 7.07% -2
03/11/2028 6.65 95.75 96.25 -0.52% 7.22% 7.15% 7
26/02/2030 6.65 94.5 94.5 0.00% 7.34% 7.34% 0
22/04/2031 7.00 96.63 96.63 0.00% 7.40% 7.40% 0
23/03/2032 7.00 95.75 96.13 -0.40% 7.49% 7.45% 5
02/11/2035 7.05 95.38 95.5 -0.13% 7.52% 7.51% 1
23/03/2037 7.25 96.38 96.5 -0.12% 7.61% 7.60% 1

 

 

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