Lebanon’s BLOM Bond Index (BBI) fell by a biweekly 7.65% to end the week on August 23rd 2019 at 78.47 points which is the lowest value since the BBI was initiated in the year 2000. Meanwhile, the JP Morgan Emerging Markets’ Bond Index (EMBI) slipped by a biweekly 0.53% to stand at 862.92 points over the same week.
According to BLOMInvest Bank, the yields on the Lebanese 2Year (2Y), 5Y and 10Y bonds surged from 14.24%, 13.2% and 11.35% on August 9th, to reach highs of 18.41%, 15.86%, and 13.25%, respectively. However, the cup remains half full despite the latest negative propaganda, noting that the higher yields now may incite local banks to benefit from the returns competing with those paid by BDL through its financial engineering schemes.
Against this backdrop, Lebanon’s 5Y Credit Default Swap (CDS) shot up from 870 points on July 1st to 1,018 on August 9th and it climbed most recently to 1,195 points on August 23rd. Foreign investors’confidence in the Lebanese fixed income market was rattled during the last 2 weeks largely due to the news that broke out citing S&P may potentially downgrade Lebanon’s sovereign credit position to “C”, which may impact the country’s financial and economic stability.
In the US, the demand on U.S. Treasuries retreated despite fluctuating yields over the week ending August 23rd. In fact, the Fed officials will gather in Jackson Hole this week for their annual monetary policy meeting. Yet, Chairman Powell’s press conference following the FOMC meeting on July 31st spurred fears amid investors as his statement revealed uncertainty around the FED’s future cuts in interest rates. Moreover, data on the economic front pushed yields further down, as IHS Markit published the manufacturing purchasing managers index fell to a 10-year low of 49.9 in August. As a result, the yields on 5Y and 10Y US treasuries dropped from 1.54% and 1.72% to 1.50% and 1.62%, respectively.
As such, the 5Y and 10Y spreads between the yields on Lebanese Eurobonds and their US comparables widened from last week’s 1,174 basis pints (bps) and 991 bps, to 1,436 and 1,163 bps this week.
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 22/08/2019 | 08/08/2019 | Change | 22/08/2019 | 08/08/2019 | Change bps |
| 12/04/2021 | 8.25 | 86.13 | 91.08 | -5.43% | 18.41% | 14.40% | 401 |
| 04/10/2022 | 6.1 | 76.45 | 82.11 | -6.90% | 15.98% | 13.21% | 277 |
| 27/01/2023 | 6 | 74.65 | 80.21 | -6.93% | 15.86% | 13.30% | 255 |
| 22/04/2024 | 6.65 | 72.47 | 78.50 | -7.69% | 15.07% | 12.88% | 219 |
| 04/11/2024 | 6.25 | 69.89 | 76.13 | -8.19% | 14.73% | 12.61% | 212 |
| 03/12/2024 | 7.00 | 72.58 | 78.81 | -7.90% | 14.62% | 12.58% | 205 |
| 26/02/2025 | 6.20 | 70.49 | 76.46 | -7.81% | 14.07% | 12.15% | 192 |
| 12/06/2025 | 6.25 | 71.00 | 76.96 | -7.74% | 13.63% | 11.82% | 182 |
| 28/11/2026 | 6.60 | 68.74 | 75.50 | -8.95% | 13.47% | 11.67% | 180 |
| 23/03/2027 | 6.85 | 68.83 | 75.75 | -9.14% | 13.55% | 11.75% | 180 |
| 29/11/2027 | 6.75 | 68.08 | 74.42 | -8.52% | 13.20% | 11.63% | 157 |
| 03/11/2028 | 6.65 | 68.06 | 73.67 | -7.62% | 12.61% | 11.31% | 130 |
| 26/02/2030 | 6.65 | 67.22 | 72.50 | -7.29% | 12.29% | 11.15% | 114 |
| 22/04/2031 | 7.00 | 67.28 | 73.28 | -8.19% | 12.37% | 11.14% | 123 |
| 23/03/2032 | 7.00 | 67.72 | 74.77 | -9.44% | 12.04% | 10.68% | 136 |
| 02/11/2035 | 7.05 | 67.74 | 73.67 | -8.05% | 11.48% | 10.45% | 103 |
| 23/03/2037 | 7.25 | 67.86 | 74.08 | -8.39% | 11.56% | 10.51% | 105 |