The BLOM Bond Index (BBI) continued the plunge started last week, when Prime Minister (PM) Hariri announced his sudden resignation from the KSA on Saturday Nov. 4th 2017. In fact, the BBI slipped by 1.39% this week, to stand at 96.65 points by Nov.16th , and it was outperformed by the JP Morgan Emerging Markets’ Bond Index (EMBI) which rose by an incremental 0.46%, ending the week at 798.89 points.
Prime Minister (PM) Hariri’s prolonged absence sparked speculation, and the resignation’s political and economic repercussions continued to suppress the demand on Lebanese Eurobonds over the past week.
Against this backdrop, yields on 5Y and 10Y Eurobonds rose from 7.60% and 7.95% last week, to 8.03% and 8.23% this week. Hence, the 5Y and 10Y spreads between the Lebanese Eurobonds and their US comparables climbed from last week’s 559 bps and 562 bps to 596 bps and 586 bps, respectively.
Nonetheless, and following last week’s surge, Lebanon’s 5Y credit default swaps (5Y CDS) witnessed a slight correction as it declined from 615 bps on Nov. 9th following the resignation announcement, to settle at 586 bps on Nov. 16th. Similarly, Saudi’s 5Y CDS slipped from 101 bps on Nov. 9th to 95 bps Nov. 16th. Foreign investors still perceive Lebanon as a risky investment, knowing they fear the eruption of a political crisis upon the expected return of Hariri sometime next week.
In the US, yields on the US treasuries maturing in 5 and 10 years respectively rose from 2.01% and 2.33% to 2.07% and 2.37% this week. Investors shied away from safe investments as October’s economic data released this Wednesday revealed a 0.1% improvement on inflation and a 0.2% uptick in retail sales. The data beat economists’ expectations and seems to cement an FOMC decision to raise interest rates in December against the backdrop of a stronger economy.
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 16/11/2017 | 09/11/2017 | Change | 16/11/2017 | 09/11/2017 | Change bps |
| 23/04/2019 | 5.5 | 96.75 | 97.5 | -0.77% | 7.93% | 7.34% | 60 |
| 20/05/2019 | 6 | 97.25 | 98.13 | -0.90% | 7.97% | 7.31% | 66 |
| 28/11/2019 | 5.45 | 95.38 | 96.38 | -1.04% | 7.95% | 7.38% | 57 |
| 09/03/2020 | 6.375 | 96.5 | 97.75 | -1.28% | 8.06% | 7.44% | 62 |
| 14/04/2020 | 5.8 | 95.13 | 96.35 | -1.27% | 8.06% | 7.47% | 59 |
| 19/06/2020 | 6.15 | 95.63 | 96.88 | -1.29% | 8.05% | 7.48% | 56 |
| 12/04/2021 | 8.25 | 100 | 102.13 | -2.09% | 8.25% | 7.53% | 72 |
| 04/10/2022 | 6.1 | 92.5 | 94 | -1.60% | 7.98% | 7.59% | 40 |
| 27/01/2023 | 6 | 91.25 | 92.75 | -1.62% | 8.09% | 7.71% | 38 |
| 22/04/2024 | 6.65 | 91.75 | 94 | -2.39% | 8.33% | 7.85% | 48 |
| 04/11/2024 | 6.25 | 90.25 | 91.5 | -1.37% | 8.11% | 7.85% | 25 |
| 03/12/2024 | 7.00 | 94.13 | 95.38 | -1.31% | 8.11% | 7.86% | 25 |
| 26/02/2025 | 6.20 | 89.5 | 90.75 | -1.38% | 8.14% | 7.89% | 25 |
| 12/06/2025 | 6.25 | 89.38 | 90.75 | -1.51% | 8.16% | 7.89% | 26 |
| 28/11/2026 | 6.60 | 90.25 | 91.5 | -1.37% | 8.14% | 7.93% | 21 |
| 23/03/2027 | 6.85 | 91.13 | 92.75 | -1.75% | 8.23% | 7.96% | 27 |
| 29/11/2027 | 6.75 | 90 | 91.75 | -1.91% | 8.23% | 7.96% | 28 |
| 03/11/2028 | 6.65 | 90 | 90.5 | -0.55% | 8.04% | 7.96% | 8 |
| 26/02/2030 | 6.65 | 89.5 | 89.63 | -0.15% | 8.01% | 7.99% | 2 |
| 22/04/2031 | 7.00 | 91 | 91.75 | -0.82% | 8.11% | 8.01% | 10 |
| 23/03/2032 | 7.00 | 90 | 91.25 | -1.37% | 8.20% | 8.04% | 16 |
| 02/11/2035 | 7.05 | 89.5 | 90.5 | -1.10% | 8.17% | 8.06% | 12 |
| 23/03/2037 | 7.25 | 89 | 91.25 | -2.47% | 8.41% | 8.15% | 25 |