Fed’s Affirmations on Interest Rate Hikes & Strong Economic Data Decelerate Demand for US Treasuries

The BLOM Bond Index (BBI) rose by 0.22% over the past week to reach 104 points, outpacing the JP Morgan Emerging Markets’ Bond Index which decreased by a weekly 0.21% to 747.39 points.

As such, the yield on the Lebanese Eurobonds maturing in 5 years fell from 6.18% on 12/01/2016 to 6.10% this week. Similarly, the yield on the Lebanese Eurobonds maturing in 10 years slid from 6.83% to 6.81% over the same period.

In the US, demand on safe-haven US treasuries decelerated over the past week, especially following the affirmation statement of the Fed’s Chair, Janet Yellen, to hike interest rates at a faster pace. The Fed also released its Beige Book on Jan.18th this week, signalling optimistic signs on the economic data front: inflation heating up to 2.1% above the target rate of 2% and industrial output growing 0.8% particularly due to a boost in the USA’s utilities index. The yields on the benchmark 10-Y treasury notes jumped to a one-week high of 2.43%.

As for the spreads between the yields on the 5 Year and 10 Year Lebanese Eurobonds and their US comparable, they decreased from 431 and 447 bps to 413 and 434 bps respectively. 

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

  19/01/2017 12/01/2017
Lebanon 459 478
KSA 114 114
Dubai 145 141
Brazil 256 255
Turkey 285

290

 

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