Stagnant US Producer Price Index and Trade Tensions Lift Demand for US Treasuries

Lebanon’s BLOM Bond Index (BBI) decreased this week, by 0.23% to reach 91.60 points.

As such, the 10 year (10Y) Lebanese Eurobonds, increased by 10 basis points to reach 9.78% this week while the yields on the 5 year (5Y) Lebanese Eurobonds declined from last week’s 9.35% to end the week at 9.27%.

The JP Morgan Emerging Markets’ Bond Index (EMBI) recorded a 0.41% weekly decline to stand at 774.3points as investors continued to shade away from these markets for fear of the repercussions of the escalating global trade wars.

The US treasury yields witnessed a decrease by this week. In details, the yields on 5Y and 10Y decreased by 5 basis points each to reach 2.80% and 2.93% , respectively.

In fact, the producer-price index was unchanged in July which may reflect inflation weaker than expected helping to support buying of treasuries and pushing yields sharply lower. Moreover, the decision on Wednesday of the Chinese Ministry of Commerce to announce a 25 percent charge on $16 billion worth of U.S. goods increased the investors’ concern about the escalation of the trade war between the US and China.

The 5Y spread between the yield on the Lebanese Eurobonds and their US decreased from last week by 21 basis points (bps) . However, the 10Y spread increased by 18 basis points.

 

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

  09/08/2018 02/08/2018
Lebanon 631 618
KSA 82 84
Dubai 124 125
Brazil 225 217
Turkey 388 341

 

Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields   Weekly
Maturity Coupon in % 09/08/2018 02/08/2018 Change 09/08/2018 02/08/2018 Change bps
28/11/2019 5.45 97.25 97.13 0.12% 7.70% 7.77% -7
09/03/2020 6.375 97.25 97.13 0.12% 8.26% 8.32% -6
14/04/2020 5.8 96.13 96 0.14% 8.31% 8.36% -6
19/06/2020 6.15 96.25 96.13 0.12% 8.36% 8.41% -5
12/04/2021 8.25 98 97.75 0.26% 9.10% 9.20% -10
04/10/2022 6.1 89.25 88.88 0.42% 9.27% 9.38% -10
27/01/2023 6 88 87.63 0.42% 9.35% 9.45% -10
22/04/2024 6.65 87.13 87.25 -0.14% 9.63% 9.59% 4
04/11/2024 6.25 84.25 84.5 -0.30% 9.67% 9.60% 7
03/12/2024 7.00 87.5 87.85 -0.40% 9.69% 9.60% 9
26/02/2025 6.20 83.25 83.63 -0.45% 9.72% 9.62% 10
12/06/2025 6.25 82.88 83.25 -0.44% 9.73% 9.64% 9
28/11/2026 6.60 82.5 83.13 -0.76% 9.72% 9.58% 13
23/03/2027 6.85 83.25 83.75 -0.60% 9.77% 9.66% 10
29/11/2027 6.75 81.88 82.38 -0.61% 9.75% 9.66% 10
03/11/2028 6.65 80 80.75 -0.93% 9.78% 9.64% 14
26/02/2030 6.65 79.63 80.5 -1.08% 9.61% 9.46% 15
22/04/2031 7.00 80.75 81.13 -0.47% 9.66% 9.60% 6
23/03/2032 7.00 80.5 81.25 -0.92% 9.59% 9.48% 12
02/11/2035 7.05 80.25 80.63 -0.47% 9.38% 9.33% 5
23/03/2037 7.25 81.25 81.75 -0.61% 9.40% 9.33% 7

 

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