Bearish Demand for US Treasuries as the FED Signals Future Interest Rate Hikes starting June 2017

04/05/2017 27/04/2017  Change Year to Date
BLOM Bond Index (BBI)* 106.73 106.49 0.22% 4.74%
Weighted Yield** 5.71% 5.75% -0.61% -14%
Weighted Spread*** 411 421 -2.38% -21%

 

04/05/2017 20/04/2017 Weekly Change
BBI 106.727 106.49 0.22%
JP Morgan EMBI 779.5 778.88 0.08%
5Y LEB 5.40% 5.42% -2
10Y LEB 6.49% 6.56% -7
5Y US 1.88% 1.81% 7
10Y US 2.36% 2.30% 6
5Y SPREAD 352 361 -9
10Y SPREAD 413 426 -13


The BLOM Bond Index (BBI) rose by 0.22% in the past week to settle at 106.73 points on May 4, 2017. The Lebanese index outpaced the JP Morgan Emerging Markets’ Bond Index (EMBI), which rose in its turn by an incremental 0.08% to 779.5 points over the week.

Demand for Lebanese Eurobonds maturing in 5 and 10 years increased over the past week as yields fell, respectively, from 5.42% and 6.56% on 27/04/2017 to 5.40% and 6.49%, respectively, on 4/05/2017.

In the USA, demand for treasuries was low this week as the Fed announced on May 3rd that Q1’s sluggish economic growth is only “transitory” and it expects a rebound by Q2 fuelled by a narrowing trade deficit , therefore signalling expected hikes in interest rates by June 2017. As such, yields on 5 year and 10 year treasuries climbed respectively, from 1.81% and 2.3% on 20/04/2017 to 1.88% and 2.36%, respectively, on 4/05/2017.

The 5 year and 10 year spread between the Lebanese Eurobonds’ yields and the US treasuries fell by 9 basis points (bps) and 13bps respectively, to stand at 352 bps and 413 bps on 4/05/2017.

5 Year Credit Default Swaps, Mid-Prices (in basis points)

  04/05/2017 27/04/2017
Lebanon 380 391
KSA 89 86
Dubai 109 109
Brazil 220 220
Turkey 213 213

 

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