Investors Fear a Prolonged China-US trade War: Demand on US Treasuries Up

Lebanon’s BLOM Bond Index (BBI) witnessed a marginal uptick of 0.68% over the week ending May 23rd to reach 89.29points. In turn, the JP Morgan Emerging Markets’ Bond Index (EMBI) recorded an incremental uptick of 0.11% to reach 824.45 points.

In Lebanon, the demand on the 5 year (5Y) and 10Y Lebanese Euro bonds grew over the week as their respective yields retreated from 11.52% and 10.90% to 11.41% and 10.80%, respectively. This may be mainly attributed to the increased probability of a final draft budget being endorsed by the government.

In the US, investors also rushed for safety as demand for 5Y and 10Y treasuries grew over the week ending May 23rd, owing it to the fear of a prolonged trade war between the two titan economies this week. This came on the back of talks that the Trump administration may slap new tariffs on Chinese goods while China warns the USA must change its “wrong actions”. In details, the yields on 5Y and 10Y US treasuries slipped from 2.18% and 2.40% to 2.11% and 2.31%, respectively.

Accordingly, the 5Y and 10Y spread between the yield on the Lebanese Eurobonds and their US comparables narrowed from 934 and 850 basis points (bps) last week to 930 and 849 bps this week.

 

Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields   Weekly
Maturity Coupon in % 23/05/2019 15/05/2019 Change 23/05/2019 15/05/2019 Change bps
12/04/2021 8.25 95.31 94.78 0.56% 11.06% 11.37% -31
04/10/2022 6.1 85.48 85.37 0.13% 11.41% 11.43% -2
27/01/2023 6 83.80 83.74 0.08% 11.52% 11.53% -1
22/04/2024 6.65 82.05 81.91 0.18% 11.53% 11.58% -5
04/11/2024 6.25 80.07 79.96 0.14% 11.24% 11.28% -4
03/12/2024 7.00 82.29 82.26 0.04% 11.41% 11.44% -3
26/02/2025 6.20 79.75 79.61 0.18% 11.04% 11.08% -4
12/06/2025 6.25 80.54 80.36 0.22% 10.70% 10.74% -4
28/11/2026 6.60 78.98 78.54 0.56% 10.75% 10.85% -10
23/03/2027 6.85 79.00 78.52 0.61% 10.90% 11.01% -11
29/11/2027 6.75 77.85 77.45 0.51% 10.79% 10.88% -9
03/11/2028 6.65 77.36 76.78 0.76% 10.48% 10.62% -14
26/02/2030 6.65 75.01 74.96 0.07% 10.60% 10.61% -1
22/04/2031 7.00 75.54 75.23 0.42% 10.67% 10.76% -9
23/03/2032 7.00 78.08 77.52 0.73% 10.08% 10.18% -10
02/11/2035 7.05 75.21 75.05 0.22% 10.19% 10.23% -4
23/03/2037 7.25 75.83 75.47 0.47% 10.22% 10.29% -7

 

 

 

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