Demand on US Treasuries Rises on the Back of Trump’s Firing FBI Director Comey  

The BLOM Bond Index (BBI) fell by 0.77% in the past week to settle at 105.6 points on May 18, 2017. The Lebanese index was outpaced by the JP Morgan Emerging Markets’ Bond Index (EMBI), which rose by an incremental 0.04% to 780.32 points over the week.

Demand for Lebanese Eurobonds maturing in 5 and 10 years slipped over the past week as yields rose, respectively, from 5.49% and 6.53% on 11/05/2017 to 5.75% and 6.63%, respectively, on 18/05/2017. This could be attributed to the political bickering that took place last week related to the Electoral Law.

In the USA, demand for treasuries rose this week after Donald Trump fired FBI Director James Comey while the White House scrambled to justify the president’s actions. It appears that Comey was investigating the Russian tampering in US elections last year, when Trump asked to dismiss the case. The recent political tumult could impeach Donald Trump. In this context, the US stock market also extended losses, so investors preferred less risky instruments when they are faced with uncertainties.

As such, yields on 5 year and 10 year treasuries ticked down respectively, from 1.93% and 2.39% on 11/05/2017 to 1.78% and 2.23%, respectively, on 18/05/2017.

The 5 year and 10 year spread between the Lebanese Eurobonds’ yields and the US treasuries increased from356 and 414, respectively, to 397 and 440 on 18/05/2017.

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

18/05/2017 11/05/2017
Lebanon 382 377
KSA 95 91
Dubai 111 112
Brazil 265 205
Turkey 213 206

 

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