Higher Demand for US treasuries as ECB Start fresh Stimulus to revive the Eurozone

The BLOM Bond Index (BBI) ended the week at 90.75 points, declining  weekly by 2.81% and the JP Morgan Emerging Markets’ Bond Index (EMBI) also decreasef by a marginal 0.38% to end the week at 806.66 points. As such, the demand on 5 year (5Y) and 10Y Lebanese Eurobonds retreated over the week, as their respective yields grew from 9.51% and 9.46% to 10.46% and 10.05%, respectively reaching the highest level since the government formation.

In the US, the demand for 5 Year and 10 Year US treasuries increased, driving yields lower by 3 basis point(bps) and 4 bps to reach 2.49% and 2.69%, respectively. The demand for US safe havens such as government paper was mainly driven by the decision of the European Central Bank to start new stimulus measures. On its Thursday meeting, the ECB stated that interest rates will remain at low level and unchanged in 2019 and will offer to bank new rounds of cheap loan under the name of Targeted Long-Term Refinancing Operation (TLTRO)  to help the slowing Eurozone economy. Worth mentioning that in the beginning of the week, the 5 Year and 10 Year US treasuries yields marked their highest rise in more than 3 months to settle at 2.56% and 2.76%, respectively as investors went to more riskyassets and global equity markets rose driving lower price for US treasuries.

Accordingly, the 5Y and 10Y spread between the yield on the Lebanese Eurobonds and its US comparable widened from 699 and 673 basis points (bps) last week to 797 and 736 bps this week .

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

08/03/2019 28/02/2019
Lebanon 755 688
KSA 87 84
Dubai 126 125
Brazil 165 156
Turkey 330 305

 

 

 

Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields   Weekly
Maturity Coupon in % 08/03/2019 21/02/2019 Change 08/03/2019 21/02/2019 Change bps
09/03/2020 6.375 96.29 95 1.36% 10.35% 10.69% -34
14/04/2020 5.8 94.95 93.63 1.40% 10.77% 10.95% -18
19/06/2020 6.15 94.68 93.25 1.54% 10.68% 11.03% -35
12/04/2021 8.25 94.42 93.25 1.25% 11.30% 11.59% -29
04/10/2022 6.1 87.10 84.88 2.62% 10.52% 11.04% -52
27/01/2023 6 86.09 83 3.72% 10.44% 11.23% -80
22/04/2024 6.65 85.04 81.38 4.50% 10.49% 11.36% -87
04/11/2024 6.25 82.88 78.75 5.25% 10.31% 11.26% -95
03/12/2024 7.00 85.61 81.75 4.73% 10.39% 11.27% -88
26/02/2025 6.20 82.96 77.63 6.87% 10.07% 11.29% -123
12/06/2025 6.25 83.58 77.5 7.84% 9.82% 11.20% -139
28/11/2026 6.60 82.12 76.25 7.69% 9.97% 11.17% -120
23/03/2027 6.85 82.34 77 6.94% 10.11% 11.17% -106
29/11/2027 6.75 81.34 75.75 7.38% 10.00% 11.08% -108
03/11/2028 6.65 80.00 74.25 7.74% 9.91% 10.97% -106
26/02/2030 6.65 78.32 72.75 7.66% 9.94% 10.92% -98
22/04/2031 7.00 78.33 73.38 6.75% 10.14% 10.98% -84
23/03/2032 7.00 78.49 73.13 7.33% 9.98% 10.86% -88
02/11/2035 7.05 78.04 72.38 7.82% 9.74% 10.59% -85
23/03/2037 7.25 78.39 72.63 7.93% 9.83% 10.68% -85

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