US Yields: Down this week as Trump Slapped New Tariffs on Chinese Goods

This week, the prime minister and head of parliament signed the 2019 Lebanese draft budget, but the final legistlation was delayed as the president requested clarifications regarding Article 80 on civil service employment.

Against this backdrop, Lebanon’s BLOM Bond Index (BBI) fell by 2.28% over the week ending August 02nd, 2019 to settle at a low of 86.52 points, compared to an index at 88.6 points on average just a week earlier. Meanwhile, the JP Morgan Emerging Markets’ Bond Index (EMBI) advanced slightly by a weekly 0.05% to reach 861.76 points.

Expectdly, for the week, the Lebanon 5Y Credit Default swap (CDS) rose by a weekly 47 basis points (bps), from 933 bps by July 25th to 980 bps by Aug. 02nd 2019. In fact, demand on 5 year (5Y) and 10Y Lebanese Eurobonds declined over the past week, as their respective yields continued to rise further, going from 11.77% and 10.88%, to 12.51% and 11.32%, respectively.

In the US, president Trump vowed to slap 10% tariffs on $300B of Chinese goods, effective Sept.1st, in addition to the tariffs previously imposed on $250B of Chinese goods.In addition, the Institute for Supply Management’s (ISM’s) Manufacturing gauge for July revealed a reading of 51.2%, the lowest since August 2016 and below the 51.9% expected by analysts. Other economic data also came in soft, with the USA’s construction spending falling 1.3% in June while expectations rose on the FED cutting rates by 25 bps in Sept.’s FOMC meeting after cutting them by a quarter basis points this week.

As such, yields on the 5Y and 10Y US treasuries lost 17 bps and 18 bps to end the week at 1.68% and 1.90%, respectively.

If followed that the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables widened from last week’s 992 and 880 bps, to 1,083 and 942 bps this week.

 
Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields   Weekly
Maturity Coupon in % 01/08/2019 25/07/2019 Change 01/08/2019 25/07/2019 Change bps
12/04/2021 8.25 92.96 93.80 -0.90% 12.98% 12.35% 63
04/10/2022 6.1 83.96 85.35 -1.64% 12.35% 11.72% 63
27/01/2023 6 82.04 83.69 -1.97% 12.51% 11.82% 69
22/04/2024 6.65 80.33 82.08 -2.13% 12.25% 11.67% 58
04/11/2024 6.25 77.84 79.59 -2.20% 12.06% 11.51% 54
03/12/2024 7.00 80.17 81.92 -2.14% 12.15% 11.62% 53
26/02/2025 6.20 78.00 79.63 -2.04% 11.68% 11.20% 48
12/06/2025 6.25 78.47 80.17 -2.12% 11.38% 10.90% 47
28/11/2026 6.60 76.54 78.67 -2.70% 11.41% 10.89% 51
23/03/2027 6.85 76.67 78.81 -2.72% 11.52% 11.01% 51
29/11/2027 6.75 75.75 77.79 -2.62% 11.32% 10.86% 46
03/11/2028 6.65 75.53 78.08 -3.27% 10.91% 10.38% 53
26/02/2030 6.65 74.08 76.53 -3.20% 10.82% 10.35% 48
22/04/2031 7.00 74.57 77.24 -3.46% 10.89% 10.40% 49
23/03/2032 7.00 75.75 78.21 -3.14% 10.51% 10.08% 42
02/11/2035 7.05 74.33 76.31 -2.59% 10.34% 10.03% 31
23/03/2037 7.25 74.50 77.13 -3.40% 10.44% 10.04% 40

 

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