OPEC’s Decision Partly Behind the Lower Demand on US Treasuries

The BLOM Bond Index (BBI) registered a 0.28% weekly drop to stand at 99.73 points, a 6-year low. Also, the JP Morgan Emerging Markets’ Bond Index fell by a weekly 0.50% to reach 724.52 points.

Hence, yields on the Lebanese Eurobonds maturing in 5Y and 10Y grew from 6.90% and 7.46% to 6.99% and 7.58%, respectively.

Demand for US treasuries maturing in 5 and 10 years dropped on expectations of interest rate hikes in the US, hence yields increased from 1.83% and 2.36%, the past week to 1.90% and 2.45%, respectively. This rise can also be attributed to the surging oil prices that are inciting expectations of a higher inflation, in addition to President Trump’s promises of fiscal stimulus.

As for the spreads between the yields on the 5 Year and 10 Year Lebanese Eurobonds and their US comparable, they broadened from 507 bps and 510 bps last week to 509 bps and 513 bps this week, respectively.

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

01/12/201624/11/2016
Lebanon562555
KSA125127
Dubai157161
Brazil312307
Turkey306296

 

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