US Yields: Down this week as as trade war escalates

Lebanon’s BLOM Bond Index (BBI) declined by 1.79% over the week ending August 9, 2019 to settle at 84.97 points meanwhile the JP Morgan Emerging Markets’ Bond Index (EMBI) recorded a uptick of 0.67% to reach 867.55 points.

In fact, the monthlong government impasse is holding the Cabinet sessions to implement the measures in the 2019 budget. As such, the demand on the 5 year (5Y) and 10Y Lebanese Eurobonds declined over the past week, as their respective yields rose from 12.51% and 11.32%, to 13.28% and 11.63%, respectively. As for the 5Y CDS,  it recorded a significant rise from 980 basis point by August 2, 2019 to 1028 basis point by August 8, 2019.

In the US, the U.S. Treasury yields extended their week-long slump as global bond markets rallied. In details, the yields on 10Y US treasuries fell to a three year low on Monday (1.86%), as stocks saw their biggest one day fall this year, after China allowed its currency to fall below 7.0 to the U.S. dollar in respond for extra tariffs being imposed on Chinese imports by President Trump last week. The U.S. Treasury labeled China a currency manipulator for the first time since 1994. As a result, the yields on 5Y and 10Y US treasuries dropped from 1.68% and 1.90% to 1.54% and 1.72%, respectively

As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables widen from last week’s 1083 and 942 bps, to 1174 and 991 bps this week.

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

08/08/2019 01/08/2019
Lebanon 1028 980
KSA 13 72
Dubai 131 131
Brazil 132 130
Turkey 383 376

 

Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields   Weekly
Maturity Coupon in % 01/08/2019 01/08/2019 Change 01/08/2019 01/08/2019 Change bps
12/04/2021 8.25 91.08 92.96 -2.02% 14.40% 12.98% 141
04/10/2022 6.1 82.11 83.96 -2.20% 13.21% 12.35% 86
27/01/2023 6 80.21 82.04 -2.24% 13.30% 12.51% 80
22/04/2024 6.65 78.50 80.33 -2.28% 12.88% 12.25% 63
04/11/2024 6.25 76.13 77.84 -2.21% 12.61% 12.06% 55
03/12/2024 7.00 78.81 80.17 -1.70% 12.58% 12.15% 43
26/02/2025 6.20 76.46 78.00 -1.98% 12.15% 11.68% 47
12/06/2025 6.25 76.96 78.47 -1.92% 11.82% 11.38% 44
28/11/2026 6.60 75.50 76.54 -1.36% 11.67% 11.41% 27
23/03/2027 6.85 75.75 76.67 -1.20% 11.75% 11.52% 23
29/11/2027 6.75 74.42 75.75 -1.76% 11.63% 11.32% 31
03/11/2028 6.65 73.67 75.53 -2.47% 11.31% 10.91% 40
26/02/2030 6.65 72.50 74.08 -2.14% 11.15% 10.82% 32
22/04/2031 7.00 73.28 74.57 -1.73% 11.14% 10.89% 25
23/03/2032 7.00 74.77 75.75 -1.29% 10.68% 10.51% 18
02/11/2035 7.05 73.67 74.33 -0.90% 10.45% 10.34% 11
23/03/2037 7.25 74.08 74.50 -0.56% 10.51% 10.44% 7

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