Demand on US Treasuries Down After November’s elections

Lebanon’s BLOM Bond Index (BBI) this week recorded a downtick of 1.18 % to close at 88.29 points, due to a lower demand for 5Y and 10Y Lebanese Eurobonds which lagged behind The JP Morgan Emerging Markets’ Bond Index (EMBI) who witnessed a 0.18% weekly increase to stand at 765.63 points. As such, the yields on (10Y)  and (5Y) Lebanese Eurobonds increased by 34 and 24 basis points (bps) to reach 10.59 % and 10.44%. 

The negative performance in the Lebanese Eurobonds market may be attributed to the delay in the formation of a new government.

In the US, the yields on the (5Y) treasuries & the (10Y) treasuries witnessed an increase of 13 bps and 10 bps ending the week at 3.09% and 3.24% respectively.  The demand on US treasuries was lower this week after the Federal Reserve’s statement on Thursday hinted at stronger economic activity and potential interest rate hike in December.

The results of the US Midterm congress elections also resulted in split control between republicans and democrats. This led investors to anticipate political gridlock over future fiscal stimulus and therefore a lower probability of increased borrowing.

Against these bond market developments over the week, the 5Y spread between the yield on the Lebanese Eurobonds and their US counterparts widened by 11 bps to settle at 735, while the 10Y spread between the yield on the Lebanese Eurobonds and their US counterparts winded by 24bps to settle at 735 bps.

 

Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields   Weekly
Maturity Coupon in % 08/11/2018 01/11/2018 Change 08/11/2018 01/11/2018 Change bps
28/11/2019 5.45 96.13 96.25 -0.12% 9.38% 9.19% 19
09/03/2020 6.375 96 96.13 -0.14% 9.62% 9.47% 15
14/04/2020 5.8 94.5 94.75 -0.26% 10.01% 9.76% 25
19/06/2020 6.15 94.25 94.5 -0.26% 10.09% 9.87% 22
12/04/2021 8.25 95.13 95.5 -0.39% 10.57% 10.37% 20
04/10/2022 6.1 86.25 87.13 -1.01% 10.48% 10.15% 32
27/01/2023 6 85 85.88 -1.02% 10.48% 10.18% 31
22/04/2024 6.65 84 84.88 -1.04% 10.58% 10.33% 25
04/11/2024 6.25 81.13 82 -1.06% 10.58% 10.35% 24
03/12/2024 7.00 84.25 85.13 -1.03% 10.58% 10.35% 23
26/02/2025 6.20 80 81.25 -1.54% 10.63% 10.31% 33
12/06/2025 6.25 79.63 81 -1.69% 10.62% 10.28% 35
28/11/2026 6.60 78.75 80.38 -2.03% 10.58% 10.23% 36
23/03/2027 6.85 79.25 80.88 -2.02% 10.65% 10.31% 35
29/11/2027 6.75 78 79.5 -1.89% 10.58% 10.27% 31
03/11/2028 6.65 77 78.5 -1.91% 10.41% 10.12% 29
26/02/2030 6.65 75.75 77.25 -1.94% 10.33% 10.06% 27
22/04/2031 7.00 76.38 77.75 -1.76% 10.43% 10.19% 24
23/03/2032 7.00 76 77.5 -1.94% 10.35% 10.10% 25
02/11/2035 7.05 75.5 77 -1.95% 10.09% 9.87% 23
23/03/2037 7.25 75.88 77.5 -2.09% 10.17% 9.94% 24

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