Lebanese Eurobonds Market and US Treasuries Stayed on their Bearish Trend

Low demand for Lebanese Eurobonds pushed the BLOM Bond Index (BBI) down by 0.22% over the past week to reach 104.70 points. Thus, the BBI lagged behind the JP Morgan Emerging Markets’ Bond Index which gained a weekly 0.40% to 684.62 points.

The yields on the 5Y and 10Y Lebanese notes increased from 5.98% and 6.48% to 6.02% and 6.51%, respectively.

Similarly, in the United States, people are speculating that the Federal Reserve will increase interest rates in December. This led to a decline in demand for medium and long term treasuries, causing the yields on the 5Y and 10Y maturities to rise by 12 basis points (bps) and 7 bps to 1.65% and 2.26%, respectively. Consequently, the spread between the yields on the 5Y Lebanese Eurobonds and their US comparable narrowed from 445 bps to 437 bps while the 10Y spread shrunk from 429 bps to 425 bps.  

Compared to the above spreads, Lebanon’s 5Y Credit Default Swaps (CDS) showed a smaller risk premium, trading at 392-417 bps compared to 398-420 bps, last week. The 5Y CDS quotes of Saudi Arabia went from 142-154 bps to 146-154 bps. The 5Y CDS of Dubai narrowed slightly from 193-206 bps to 192-205 bps. Similarly, the 5Y CDS of Brazil and Turkey contracted from 442-446 bps and 253-257 bps to 397-403 bps and 245-250 bps, respectively.

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