Demand for Lebanese Eurobonds strengthened during the past two weeks, highlighting the positive investor sentiment despite some political bickering between the different parties. This translated into the BLOM Bond Index (BBI) increasing 0.54% to 107.39 points from the 1st to the 16th of April. Yet it still was outperformed by the JP Morgan emerging markets’ bond index, which gained a 1.53% to reach 690 points over the same period.
Consequently, the yields on the 5Y and 10Y Lebanese notes respectively dropped by 10 basis points (bps) and 9 bps to 5.22% and 6.04% in the past two weeks. In the global level, the US bond market witnessed a mixed performance as the yield on the 5Y US benchmark notes slipped by 1 bp to 1.31 while that of the 10Y augmented by 3 bps to 1.90%.
The ambiguous outlook on the US treasury was evident despite the recent survey by Bloomberg which took place in the beginning of the month. The results revealed that 42% of the surveyed economists/bankers expected interested rates to hike by September, up by 20% from a similar poll conducted a month ago.
Accordingly, the spread between the yields on the 5Y and 10Y Lebanese Eurobonds and their US comparable narrowed from 400 bps and 426 bps to 391 bps and 414 bps, respectively.
Lebanese 5Y Credit Default Swaps (CDS) recorded 379-400 bps slightly increasing on the bid side with the ask side remaining constant as comparted to April 1st quote of 377-400 bps. In regional economies, 5 year CDS quotes of Saudi Arabia and Dubai narrowed from respective 72-81 bps and 213-225 bps to 68-76 bps and 202-215 bps. In addition, Brazil’s and Egypt’s 5 year CDS quotes also contracted from April 1st quotes of 266-272 bps and 326-356 bps to 237-239 bps and 313-337 bps, respectively. Turkeys’ recent political disputes and the Turkish Lira falling to its newest low versus the dollar of TL/USD 2.703, resulted in Turkey’s CDS quote widening from 215-218 bps to 230-234 bps over the same period.