Lebanese Eurobonds’ Market Followed the Downtrend of US Treasuries

The Lebanese government successfully completed a new Eurobonds issuance this week, for 2 tranches: 8Y and 15Y. The size of each issue was $700M for the 8Y and $300M for the 15Y. Both tranches were oversubscribed; hence the allocation for the 8Y was 80%, while that of the 15Y was 70%. The coupon rates for the 8Y and 15Y maturities stood at 6.65% and 7%, respectively, paid semi-annually. Foreign participation was around 7.5%. The lead managers of this issuance are BLOM Bank S.A.L, Byblos Bank S.A.L, and Deutsche Bank.

In the secondary market, Lebanese Eurobonds saw fading demand for most of its long-term maturities over the week. Thus, the BLOM Bond Index (BBI) lost 0.15% over the week to 103.60 points. Hence, the Lebanese gauge could not outperform the JP Morgan Emerging Markets’ Bond Index, which increased by a 0.41% to 718.41 points.

The lower demand for long-term maturities pushed the yield on the 10Y Lebanese Eurobonds up by 7 basis points (bps) to 6.72%. The decline in the 10Y maturities might be due to investors selling the existing maturities to subscribe in new issues. Meanwhile, the yield on the 5Y Lebanese Eurobonds lost 2 bps to stand at 6.12%.

In the US, demand for US treasuries declined for the second week. Higher oil prices and improved job markets in the US increased speculations that the US Federal Reserve will increase interest rates this year. Hence, the 5Y and 10Y yields in the US increased from 1.26% and 1.80% last week to 1.35% and 1.88%, respectively. Therefore, the spread between the yields on the 5Y and 10Y Lebanese Eurobonds and their US comparable narrowed by 11 bps and 1 bp to end the week at 477 bps and 491 bps, respectively.

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

Lebanese Eurobonds’ Market Followed the Downtrend of US Treasuries

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