Investors’ demand for Lebanese Eurobonds increased during the week as political dialogue extended across different political parties and sects to diffuse security tensions. Consequently, the BLOM Bond Index (BBI) experienced a weekly 0.09% uptick to 106.97 points mainly on improving demand for medium term and long term maturities. The 5Y and 10Y yields each edged down by 2 basis points (bps) and 1 bp to 5.25% and 6.20%, respectively.
In the U.S, wage increases and an improving labor market, coupled with the Fed’s intentions of raising interest rates between June and September decreased demand for U.S treasuries. In details, the 5Y and 10Y yields augmentedthe week by 8 bps and 12 bps to 1.58% and 2.11%, respectively. Correspondingly, the 5Y and 10Y spreads between the Lebanese Eurobonds and their U.S benchmark narrowed by 10 bps and 13 bps to respective levels of 367 bps and 409 bps.
Emerging markets benefited from the short-term rally in oil prices and foreign peace-keeping attempts in Russia and Ukraine. Accordingly, emerging bonds advanced over the week, sending the JP Morgan Emerging Markets Index up by 0.31% to 668.68 points.
Lebanon’s credit default swaps for 5 years (CDS) steadied over the past week, moving from last week’s quote of 370-392 bps to a current 371-393 bps. In regional economies, the 5Y insurance premiums on sovereign debt in Saudi Arabia remained at last week’s quote of 75-80 bps, while that of Dubai widened from 208-226 bps to 213-228 bps. As for emerging economies, the 5Y CDS quotes in Brazil and Turkey narrowed from 237-240 bps and 188-191 bps to respective quotes of 235-237 bps and 185-187 bps.