Lebanon Eurobonds Yields Up Amid Increasing Tensions Between Hezbollah-Israel

Lebanon’s BLOM Bond Index (BBI) declined by 2.82% over the week ending August 30, 2019 to settle at 76.26 points meanwhile the JP Morgan Emerging Markets’ Bond Index (EMBI) recorded a uptick of 0.35% to reach 865.91 points.

In fact, the increasing tensions between Hezbollah and Israel following the crash of two drowns on Sunday  have intensified pressure on Lebanon’s Eurobonds and the county’s 5-year credit default swaps (CDS).  According to BLOMInvest Bank, the demand on the 5 year (5Y) and 10Y Lebanese Eurobonds dropped over the past week, as their respective yields rose from 15.86% and 13.25%, to 16.88% and 13.80%, respectively. As for the 5Y CDS,  it recorded a significant rise from 1,195 basis point by August 22, 2019 to 1,216 basis point by August 29, 2019.

In the US, the U.S. Treasury yields extended their week-long slump as global bond markets rallied. In fact, the news that China and US might restart negociations on de-escalating trade war was not enough to restore investors’ confidence. In details, the yield curve is still inverted (indicating a possible coming recession)  amid growing worries about the health of the economy. Moreover, demand for safe haven and government bonds rose following the UK Queen acceptance to extend the suspension of Parliament until Oct. 14, two weeks before the twice-delayed deadline when the U.K. must leave the European union. As a result, the yields on 5Y and 10Y US treasuries dropped from 1.50% and 1.62% to 1.40% and 1.50%, respectively.

As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables widen from last week’s 1,436 and 1,163 bps, to 1,548 and 1,230 bps this week.

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

29/08/2019 22/08/2019
Lebanon               1,216                 1,195
KSA 69 68
Dubai 130 132
Brazil 139 136
Turkey 437 417

 

 

Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields   Weekly
Maturity Coupon in % 28/08/2019 22/08/2019 Change 28/08/2019 22/08/2019 Change bps
12/04/2021 8.25 86.13 86.13 0.00% 18.41% 18.41% 0
04/10/2022 6.1 76.45 76.45 0.00% 15.98% 15.98% 0
27/01/2023 6 74.65 74.65 0.00% 15.86% 15.86% 0
22/04/2024 6.65 72.47 72.47 0.00% 15.07% 15.07% 0
04/11/2024 6.25 69.89 69.89 0.00% 14.73% 14.73% 0
03/12/2024 7.00 72.58 72.58 0.00% 14.62% 14.62% 0
26/02/2025 6.20 70.49 70.49 0.00% 14.07% 14.07% 0
12/06/2025 6.25 71.00 71.00 0.00% 13.63% 13.63% 0
28/11/2026 6.60 68.74 68.74 0.00% 13.47% 13.47% 0
23/03/2027 6.85 68.83 68.83 0.00% 13.55% 13.55% 0
29/11/2027 6.75 68.08 68.08 0.00% 13.20% 13.20% 0
03/11/2028 6.65 68.06 68.06 0.00% 12.61% 12.61% 0
26/02/2030 6.65 67.22 67.22 0.00% 12.29% 12.29% 0
22/04/2031 7.00 67.28 67.28 0.00% 12.37% 12.37% 0
23/03/2032 7.00 67.72 67.72 0.00% 12.04% 12.04% 0
02/11/2035 7.05 67.74 67.74 0.00% 11.48% 11.48% 0
23/03/2037 7.25 67.86 67.86 0.00% 11.56% 11.56% 0

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