Demand for Eurobonds was frail during the week. This was mirrored by the yields on the 5Y and 10Y Lebanese Eurobonds which augmented by 6 basis points (bps) and 3 bps to 5.32% and 6.13%, respectively. Consequently, the BLOM Bond Index (BBI) ticked down by a weekly 0.20% to 106.63 points, cutting its year-to-date gains by 0.52%.
Even though the BBI experienced a downturn during the week, it managed to outperform the JP Morgan emerging markets’ bond index, which posted a 0.87% weekly decline to 665.71 points.
In the US, future deflationary expectations pushed investors towards long term debt securities, leading to a higher demand for 10Y notes and lower demand for 5Y notes. The yield on 5Y US treasuries edged up from 1.57% to 1.59%, while that of 10Y lost 1 bp to 2.10%, this week. Hence, with the lower demand on Lebanese treasuries, the 5Y and 10Y spreads between the yields on Lebanese Eurobonds and their US equivalent broadened by 4 bps each to 373 bps and 403 bps, respectively.
The Lebanese 5Y Credit Default Swaps (CDS) remained unchanged at 372-392 bps.
In regional economies, 5 year CDS quotes of Saudi Arabia, and Turkey relatively remained steady going from 71-76 bps and 214-217 bps to 70-77 bps to 213-217 bps, respectively. On the other hand, Dubai and Brazil 5Y CDS quotes broadened from 190-205 bps and 251-253 bps to 200-213 bps and 289-294 bps, respectively.