Brief US Government Shutdown Weakened the Demand on Treasuries

The BLOM Bond Index (BBI) slipped by an incremental 0.18%, to end the week at 103.14 points by January 25, 2018. The JP Morgan Emerging Markets’ Bond Index (EMBI) lost a weekly 0.13% but still outweighed the BBI ending the week at 807.83 points. 

The demand on Lebanese Eurobonds maturing in 5 and 10 years (5Y and 10Y) shrank throughout the week, as reflected in the increased yields which jumped from last week’s 6% and 6.94%, to 6.05% and 6.96%, respectively, this week.

As such, the 5Y and 10Y spreads between the Lebanese Eurobonds and their US comparable grew from last week’s 357 basis points (bps) and 431 bps to 364 bps and 433 bps, respectively.

In the US, the demand on 5Y treasuries rose while that on the 10Y slipped over the week starting Jan. 22nd. In details, yields on the 10Y treasuries climbed from last week’s 6.94% to 6.96% this week owing it to a short-lived, 3 day partial shutdown of the government on Jan. 20th as the lawmakers failed to agree on a 2018 spending package for the country. However, the disruption ended by the 22nd with a Republican pledge to address the controversial immigration reform prior to Feb. 8th, when the government funding expires. This eased investors’ concerns and the yields on 5Y treasuries slid from 2.43% last week to 2.41% this week.

Weekly Change of Lebanese Eurobonds Prices

 PricesWeeklyYieldsWeekly
Maturity Coupon in %25/01/201818/01/2018Change 25/01/201818/01/2018Change bps
23/04/20195.5100.13100.31-0.18%5.38%5.24%15
20/05/20196100.75100.94-0.19%5.40%5.26%14
28/11/20195.4599.88100.13-0.25%5.51%5.37%14
09/03/20206.375101.38101.75-0.36%5.67%5.49%18
14/04/20205.8100.13100.19-0.06%5.73%5.70%3
19/06/20206.15100.75100.88-0.13%5.81%5.75%5
12/04/20218.25106.75106.750.00%5.91%5.92%-1
04/10/20226.11001000.00%6.10%6.10%0
27/01/2023699990.00%6.24%6.23%0
22/04/20246.65100.13100.38-0.25%6.62%6.57%5
04/11/20246.2597.7598-0.26%6.67%6.62%5
03/12/20247.00101.38101.63-0.25%6.74%6.70%4
26/02/20256.2096.596.75-0.26%6.83%6.78%5
12/06/20256.2596.596.75-0.26%6.86%6.82%5
28/11/20266.6097.8898-0.12%6.92%6.90%2
23/03/20276.8598.8899.25-0.37%7.02%6.96%6
29/11/20276.7597.7598.38-0.64%7.07%6.98%9
03/11/20286.6596.2596.75-0.52%7.15%7.08%7
26/02/20306.6594.594.75-0.26%7.34%7.31%3
22/04/20317.0096.6396.75-0.12%7.40%7.39%2
23/03/20327.0096.1396.25-0.12%7.45%7.43%1
02/11/20357.0595.596.13-0.66%7.51%7.44%7
23/03/20377.2596.596.50.00%7.60%7.60%0

 

 

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