Demand for US Treasuries Rises as Details Remain Scarce on Trump’s Stimulus Pledge

The BLOM Bond Index (BBI) rose by a weekly 0.61% to reach 104.77 points, as demand for medium and long term Lebanese Eurobonds increased.

The Lebanese index was outpaced by the JP Morgan Emerging Markets’ Bond Index, which increased by a weekly 0.75% to 758.61 points.

Yields on the Lebanese Eurobonds maturing in 5 years and 10 years declined by 20 and 11 basis points (bps) to settle at 5.9% and 6.73%, respectively, this week.

Similarly, in the United States, demand for safe haven assets was more pronounced, with the yields on the 5 Year and 10 Year treasuries sliding from 1.92% and 2.48% last week to 1.88% and 2.40% this week, respectively. Demand for US treasuries shot up, as investors grew anxious on Trump’s infrastructure stimulus plans, with no details shared to-date by his administration. Also, Thursday’s speech of St. Louis Fed President, James Bullard, assured the markets that inflation is still “muted” and interest rates can remain low for now.

The 5 year and 10 year spreads between the Lebanese Eurobonds’ yields and the US treasuries narrowed by 16 bps and 3 bps, to 402 bps and 433, respectively.

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

  09/02/2017 02/02/2017
Lebanon 443 447
KSA 109 113
Dubai 134 136
Brazil 234 243
Turkey 250

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