Demand on US Treasuries Weakened as Investors Preferred Equities this Week

Over the past week, the BLOM Bond Index (BBI) marginally slipped by 0.15%, to end the week at 103.59 points. Meanwhile, the JP Morgan Emerging Markets’ Bond Index (EMBI) incrementally rose by 0.22%, to end the week at 807.34 points.

The demand was mixed on 5Y versus 10Y Lebanese Eurobonds during the week. While demand for bonds maturing in 10 years slipped, a higher demand was registered for Eurobonds maturing in 5 years. Accordingly, the yields on the 10Y bonds grew from last week’s 6.95% to 6.97% this week, while those on 5Y Eurobonds contracted from 6.12% to 6.10% over the same period.

In the US, the overall demand on treasuries was weak, as investors opted for equities instead. During the week, President Trump met five candidates (finalists) running for the position of US FED governor, after which the American paper Politico announced that the ‘dovish’ FED governor Jerome Powell is the leading candidate to succeed Janet Yellen. Knowing that investors feared Trump would select a candidate with a more hawkish attitude, Powell in the lead signals the FED would probably maintain its existing market-friendly monetary policy.

As such, the yields on the US Treasuries maturing in 5Y rose from 1.95% to 1.98% this week, while those on the 10Y treasuries witnessed no change, remaining at 2.33%.

The 5Y spread between the Lebanese Eurobonds and their US comparables dropped from last week’s 417 bps to 412 bps, while the 10Y spread rose from 462 bps to 464 over the same period.

Weekly Change of Lebanese Eurobonds Prices

 PricesWeeklyYieldsWeekly
Maturity Coupon in %19/10/201712/10/2017Change 19/10/201712/10/2017Change bps
12/11/20185.15100.8100.50.30%4.37%4.67%-30
23/04/20195.5100.63100.630.00%5.06%5.07%0
20/05/20196101.38101.380.00%5.08%5.09%-1
28/11/20195.45100.5100.380.12%5.19%5.26%-6
09/03/20206.375101.75102.25-0.49%5.58%5.36%22
14/04/20205.8100.25100.5-0.25%5.69%5.58%11
19/06/20206.15101101.13-0.13%5.74%5.69%5
12/04/20218.25107.25107.63-0.35%5.91%5.81%10
04/10/20226.1100.1399.880.25%6.07%6.13%-6
27/01/2023698.6398.630.00%6.31%6.31%0
22/04/20246.651001000.00%6.65%6.65%0
04/11/20246.2597.7598-0.26%6.65%6.61%5
03/12/20247.00101.75101.88-0.13%6.69%6.66%2
26/02/20256.209797.13-0.13%6.72%6.70%2
12/06/20256.2596.8897.13-0.26%6.78%6.73%4
28/11/20266.6097.7598.13-0.39%6.94%6.88%6
23/03/20276.8599.2599.5-0.25%6.96%6.92%4
29/11/20276.7598.3898.5-0.12%6.97%6.96%2
03/11/20286.6596.6396.88-0.26%7.09%7.06%3
26/02/20306.659696.38-0.39%7.14%7.09%5
22/04/20317.009898.25-0.25%7.23%7.20%3
23/03/20327.009797.25-0.26%7.34%7.31%3
02/11/20357.0596.596.63-0.13%7.40%7.39%1
23/03/20377.2596.7596.88-0.13%7.57%7.56%

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