Demand for Eurobonds Declined

11/09/2014 04/09/2014 Change Year to Date
BLOM Bond Index (BBI)* 108.409 108.550 -0.13% 2.62%
Weighted Yield** 5.11% 5.09% 2 9
Weighted Spread*** 339 345 -6 -91

 

Demand for Lebanon’s Eurobonds abated this week, dragging the BLOM Bond Index (BBI) down by 0.13% to 108.41 points, but the index is still up 2.62% since year start. The weakened demand for Eurobonds was mirrored on the 5Y and 10Y yields, inching up slightly by 1 basis point (bp) and 3 bps to 5.05% and 6.15%, respectively.

Due to the stronger dollar, investors diverted away from emerging market’s bonds. Thus, the JP Morgan emerging countries’ bond index lost 0.80% over the week to 683.31 points.

Fears that the U.S Central Bank might tighten monetary policy in the second quarter of next year, and forecasts that U.S reports might reveal improvements in retail sales and consumer confidence, led the U.S Treasuries to experience a drop in demand for the second week in a row. 5Y and 10Y treasury yields escalated to 1.79% and 2.54%, up by 8 bps and 9 bps from the prior week’s levels. As a result, the 5Y and 10Y spreads between the Lebanese Eurobonds and their U.S benchmark narrowed by 7 bps and 6 bps to 326 bps and 361 bps, respectively.

Lebanon’s credit default swap for 5 years (CDS) remained unchanged from last week’s quote at 330-360 bps. In regional economies, 5Y CDS quotes of Saudi Arabia narrowed by 2 bps to 46-51 bps. Dubai 5Y CDS contracted from 151-161 bps to 148-158 bps. Similarly, the 5Y CDS of Turkey tightened by 4 bps to 176-179 bps. In contrast, Brazil’s 5Y CDS widened from 129-131 bps to 136-138 bps.

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