Demand on US treasuries Down Despite Khashoggi-Tensions between the West and the KSA this Week

Lebanon’s BLOM Bond Index (BBI) this week rose by 3.01% to close at 89.95 points, outweighing the 0.27% marginal uptick recorded in the JP Morgan Emerging Markets’ Bond Index (EMBI) which closed the week at 769.76 points. In fact, the improvement in the BBI came on the back of the president’s and the prime minister’s announcements Thursday that a new government will be formed “very soon”, as negotiations among the political parties intensified over the week.

As yields move inversely to prices, the yields on the 5 year (5Y) and 10Y Lebanese Eurobonds dropped from last week’s 10.76% and 10.70% to stand at 9.90% and 10.10%, respectively, by the week ending Oct. 18, 2018. 

In the USA, despite the growing tensions between western powers and the KSA regarding the disappearance of the Saudi journalist Khashoggi, demand for safe haven US bonds was muted. This may be attributed to Q3’s upbeat consumer spending data released by the US Commerce Dept. this week, coupled with the FED’s released minutes which suggested the pace of economic growth was “strong enough”. Both factors reversed investors’ outlook on the slowdown of global economic growth spurred last week.    

As a result, the yields on the 5Y and 10Y treasuries witnessed weekly rises of 3 basis points (bps) each, ending the week at 3.03% and 3.17%, respectively.

Against these bond market developments over the week, the 5Y and 10Y spread between the yield on the Lebanese Eurobonds and their US counterparts narrowed by 89 and 63 bps  to settle at 687 and 693 bps, respectively.

 

Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields   Weekly
Maturity Coupon in % 18/10/2018 11/10/2018 Change 18/10/2018 11/10/2018 Change bps
28/11/2019 5.45 96.25 95.13 1.18% 9.06% 10.10% -104
09/03/2020 6.375 96.25 94.88 1.44% 9.30% 10.36% -106
14/04/2020 5.8 94.88 93.25 1.75% 9.57% 10.77% -120
19/06/2020 6.15 94.63 93 1.75% 9.70% 10.78% -108
12/04/2021 8.25 96.13 94 2.27% 10.05% 11.06% -101
04/10/2022 6.1 87.38 85.25 2.50% 10.04% 10.75% -71
27/01/2023 6 86.25 84.38 2.22% 10.03% 10.62% -59
22/04/2024 6.65 85.5 82.75 3.32% 10.15% 10.88% -73
04/11/2024 6.25 82.88 80.13 3.43% 10.10% 10.80% -70
03/12/2024 7.00 86 82.75 3.93% 10.12% 10.92% -80
26/02/2025 6.20 82.25 79 4.11% 10.04% 10.84% -80
12/06/2025 6.25 81.88 78.75 3.97% 10.05% 10.80% -75
28/11/2026 6.60 81.25 78.25 3.83% 10.03% 10.66% -63
23/03/2027 6.85 81.63 78.75 3.66% 10.14% 10.74% -60
29/11/2027 6.75 80.5 77.5 3.87% 10.07% 10.66% -59
03/11/2028 6.65 79 75.75 4.29% 10.01% 10.63% -62
26/02/2030 6.65 77.88 74.88 4.01% 9.94% 10.48% -54
22/04/2031 7.00 78.38 75.25 4.16% 10.08% 10.62% -54
23/03/2032 7.00 78.25 74.88 4.50% 9.97% 10.53% -56
02/11/2035 7.05 78 74.5 4.70% 9.72% 10.24% -52
23/03/2037 7.25 78.63 75 4.84% 9.77% 10.30% -53

 

 

 

 

Leave a Reply

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