US Treasury Yields Plunge after Fed Raises Interest Rates

The BLOM Bond Index (BBI) increased by a weekly 0.70% to reach 104.90 points; nonetheless, it lagged behind the JP Morgan Emerging Markets’ Bond Index which registered a weekly rise of 0.71% to 761.22 points.

Demand for Lebanese Eurobonds maturing in 5 and 10 years escalated this week. As such, the 5Y yields dropped from 5.96% to 5.73% and the 10Y yields fell from 6.93% to 6.86%.

Moreover, demand for US treasuries maturing in 5 years and 10 years also witnessed a rise during the week with their yields dropping from 2.13% and 2.60% to 2.05% and 2.53%, respectively.   US Treasury yields plummeted after the Federal Reserve raised interest rates by 25 bps for the second time in three months and has signalled that there will be no increase in the pace of monetary tightening.

Moreover, despite the fact that the Fed increased interest rates, the Lebanese Central Bank’s Governor, Riad Salemeh, stated that Lebanon will not follow the US’s lead as a 1% increase in interest rates will lead to a $1.3B hike in the public debt’s level.

The 5 year spread between the Lebanese Eurobonds’ yields and the US treasuries shrank by 15 bps to stand at 368 bps, while that of the 10 year treasuries remained stable at 433 bps.

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

16/03/2017 09/03/2017
Lebanon 408 444
KSA 91 97
Dubai 110 121
Brazil 217 236
Turkey 226 240

Weekly Change in Lebanese Eurobonds’ Prices and Yields

Prices Weekly Yields Weekly
Maturity Coupon in % 16/03/2017 09/03/2017 Change 16/03/2017 09/03/2017 Change bps
12/06/2018 5.15 101.25 101 0.25% 4.11% 4.33% -22
12/11/2018 5.15 101.25 101.25 0.00% 4.36% 4.37% -1
23/04/2019 5.5 101.38 100.75 0.63% 4.81% 5.13% -32
20/05/2019 6 102.38 101.75 0.62% 4.84% 5.15% -31
28/11/2019 5.45 101.38 100.63 0.75% 4.90% 5.20% -30
09/03/2020 6.375 103.75 102.5 1.22% 5.01% 5.46% -46
14/04/2020 5.8 101.75 100.75 0.99% 5.18% 5.54% -36
19/06/2020 6.15 102.5 101.25 1.23% 5.31% 5.73% -42
12/04/2021 8.25 109.75 108.5 1.15% 5.54% 5.88% -34
04/10/2022 6.1 100.75 100 0.75% 5.94% 6.10% -16
27/01/2023 6 100 99.5 0.50% 6.00% 6.11% -10
22/04/2024 6.65 101.25 100.5 0.75% 6.44% 6.57% -13
04/11/2024 6.25 98.75 98 0.77% 6.47% 6.60% -13
03/12/2024 7.00 103 102.25 0.73% 6.52% 6.65% -12
26/02/2025 6.20 97.5 97.25 0.26% 6.62% 6.66% -4
12/06/2025 6.25 97.63 97.25 0.39% 6.63% 6.70% -6
28/11/2026 6.60 98.25 97.75 0.51% 6.85% 6.92% -7
29/11/2027 6.75 98.63 97.63 1.02% 6.94% 7.07% -14
03/11/2028 6.65 97.5 96.5 1.04% 6.98% 7.11% -13
26/02/2030 6.65 97.13 97 0.13% 6.99% 7.01% -2
22/04/2031 7.00 98.75 98.5 0.25% 7.16% 7.19% -3
02/11/2035 7.05 98.38 98 0.39% 7.22% 7.26% -4

 

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