Slight Change for US yields as Trade Tensions Continue

Lebanon’s BLOM Bond Index (BBI) continued the recovery this week, rising by 0.55% to reach 91.81 points on higher demand along the whole yield curve except for the 10 year Eurobonds . The BBI recovered from the trough it reached on July 2nd 2018 when it recorded a low of 86.91 points , due to the fact that the Lebanese commercial banks were freeing up dollars through the sale of Eurobonds in an effort to place dollars at the Central Bank in exchange for attractive returns through the financial engineering scheme.

As such, the yields on the 5 year (5Y) Lebanese Eurobonds declined from last week’s 9.54% to end the week at 9.35%. As for the yields on the 10 year (10Y) Lebanese Eurobonds, they increased by 3 basis points to reach 9.68% this week.

The JP Morgan Emerging Markets’ Bond Index (EMBI) recorded a 0.72% weekly decline to stand at 777.49 points as investors continued to shade away from these markets for fear of the repercussions of the escalating global trade wars

Demand on treasuries was balanced over the week although it fluctuated on some specific dates due to political and economic events. In the US, the yields on the 5Y decreased slightly by 1 basis point and 10Y treasury remained unchanged from last week . On Wednesday, the 10-year US government bond yield rose 3.7 basis points hitting a level it hasn’t seen since May 23 due to the fact that the Federal Reserve stayed the course with its monetary policy plan and emphasized the strength of the domestic economy, affirming expectations that a further two rate increases are in store for 2018. However, by the end of this week the 10-year US yields retreated to its current level due to the investors’ concerns about Trump tariffs and escalation of the trade war between US and China.

Accordingly, the 5Y and 10Y spreads between the yield on the Lebanese Eurobonds and their US comparable increased from last week’s 668 basis points (bps) and 667 bps to 674 bps and 670 bps, respectively.

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

02/08/2018 26/07/2018
Lebanon 618 616
KSA 84 83
Dubai 125 125
Brazil 217 214
Turkey 341 312

 

Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields   Weekly
Maturity Coupon in % 02/08/2018 26/07/2018 Change 02/08/2018 26/07/2018 Change bps
28/11/2019 5.45 97.13 97.13 0.00% 7.77% 7.74% 3
09/03/2020 6.375 97.13 97.25 -0.12% 8.32% 8.22% 10
14/04/2020 5.8 96 96 0.00% 8.36% 8.34% 2
19/06/2020 6.15 96.13 96 0.14% 8.41% 8.47% -6
12/04/2021 8.25 97.75 97.5 0.26% 9.20% 9.30% -10
04/10/2022 6.1 88.88 88.13 0.85% 9.38% 9.60% -23
27/01/2023 6 87.63 86.75 1.01% 9.45% 9.70% -26
22/04/2024 6.65 87.25 86.5 0.87% 9.59% 9.77% -18
04/11/2024 6.25 84.5 83.63 1.04% 9.60% 9.80% -20
03/12/2024 7.00 87.85 86.9 1.09% 9.60% 9.82% -22
26/02/2025 6.20 83.63 82.75 1.06% 9.62% 9.82% -20
12/06/2025 6.25 83.25 82.38 1.06% 9.64% 9.83% -19
28/11/2026 6.60 83.13 82.75 0.46% 9.58% 9.66% -7
23/03/2027 6.85 83.75 83.75 0.00% 9.66% 9.66% 0
29/11/2027 6.75 82.38 82.25 0.16% 9.66% 9.68% -2
03/11/2028 6.65 80.75 80.75 0.00% 9.64% 9.64% 0
26/02/2030 6.65 80.5 79.75 0.94% 9.46% 9.58% -12
22/04/2031 7.00 81.13 81 0.16% 9.60% 9.62% -2
23/03/2032 7.00 81.25 80.25 1.25% 9.48% 9.63% -15
02/11/2035 7.05 80.63 79.5 1.42% 9.33% 9.48% -16
23/03/2037 7.25 81.75 80.5 1.55% 9.33% 9.50% -17

 

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