Lower Demand on US Treasuries after Trump Election

During the week ending November 10, Lebanese Eurobonds witnessed a slight fall, as the BLOM Bond Index (BBI) declined 0.15% over the week to reach 102.44 points. Still, the BBI outperformed the JP Morgan Emerging Markets’ Bond Index which lost a weekly 2.17% to reach 742.13 points.

The rise in the yields of the Lebanese Eurobonds maturing in 5Y and 10Y from 6.40% and 6.97% last week, to 6.43% and 7%, respectively, depicted the lower demand for Lebanese Eurobonds.

In the U.S., Treasuries saw rising yields amid rising expectations that President Trump’s policies, which include tax cuts and infrastructure spending that may drive the US further into debt, will lead to a brighter inflation outlook and a potential increase in interest rates in the near future. As such, the yields on the US treasuries maturing in 5 and 10 years rose from 1.26% and 1.82% last week to 1.56% and 2.15% this week. Hence, the spread between the yields on the 5 Year and 10 Year Lebanese Eurobonds and their US comparable fell from 514 bps and 515 bps last week to 487 bps and 485 bps this week, respectively.

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

10/11/2016 03/11/2016
Lebanon 525 514
KSA 137 134
Dubai 154 151
Brazil 305 288
Turkey 288 265

 

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