During the past week of regular political dialogues it seems that investors were in a “wait and see” approach regarding demand for long term notes while medium and short term maturities saw a decline in demand. The BLOM Bond Index (BBI), which tracks the performance of the Lebanese Eurobonds, slightly dropped by 0.01%, during the week, to 104.786 points. In addition, the BBI was outperformed by the JP Morgan Emerging Markets’ Bond Index that gained 1.71%, during the same period, to 675 points.
The yield on the Lebanese Eurobonds maturing in 5Y gained 6 basis points (bps) to 6.00% while that of the 10Y remained at last Thursday’s level of 6.48%.
In the US, treasuries experienced a bearish week despite ISM (Service Sector Index) data, which illustrated a sluggish expansion in the U.S. service sector in addition to lower than expected Non-Farm Payrolls (NFP) in the U.S. during September. In fact, what could be holding back US fixed income securities was the awaited minutes of meetings from the Federal Reserve that took place last month and released on Thursday, regarding interest rates hike.
The 5Y and 10Y yields increased by 3 bps and 7 bps to 1.40% and 2.12%, respectively. Consequently, the spread between the yields on the 5Y Lebanese Eurobonds and their US comparable widened from 457 bps to 460 bps while that of the 10Y narrowed by from 443 bps last week to 436.
Lebanon’s 5Y Credit Default Swaps (CDS) narrowed from 405-428 bps to 395-405 bps. The 5Y CDS quotes of Saudi Arabia and of Brazil contracted from 119-129 bps and 460-468 bps to 117-122 bps and 420-426bps, respectively. As for Turkey their 5Y CDS quotes also went down from 311-315 bps to 270-274 bps this week. In contrast, Dubai’s 5Y CDS quotes broadened from 180-194 bps to 190-195 bps.