Demand for Lebanese Eurobonds declined over the past week as shown by the 2.04% y-t-d decline and 0.75% weekly decline in the BLOM Bond Index (BBI) to reach 103.91 points. The JP Morgan Emerging Markets’ Bond Index recorded a more pronounced decline of 0.98% over the week to reach 677.94 points.
The yields on the 5Y and 10Y Lebanese notes increased from 6.02% and 6.51% to 6.15% and 6.69%, respectively.
Demand for safe haven US treasuries continued to decline as investors are factoring-in a potential interest rate hike by the Federal Reserve in December. Accordingly, the yield on 5Y and 10Y US treasuries rose from last week’s 1.65% and 2.26% to 1.73% and 2.32%, respectively.
Consequently, the spread between the yields on the 5Y Lebanese Eurobonds and their US comparable rose from 437 basis points (bps) to 442 bps while the 10Y spread widened from 425 bps to 437 bps.
Lebanon’s 5Y Credit Default Swaps (CDS) remained unchanged at 392-417 bps. Saudi Arabia’s 5Y CDS widened from last week’s 146-154 bps to 153-162 bps while Dubai’s quotes narrowed from 192-205 bps to 190-198 bps. Investors sought more hedge against sovereign debt exposure in Brazil and Turkey since Brazil’s 5Y CDS quotes grew from 397-403 bps to 421-429 bps and since Turkey’s quotes increased from 245-250 bps to 249-253 bps.