Yields on Lebanese Eurobonds Down: Officials Announce “Lebanon in a state of economic emergency”

Lebanon’s BLOM Bond Index (BBI) recovered from last week’s downtick on the back of tensions between Hezbollah & Israel. As such, the BBI added a weekly 3.07%, to stand at 78.6 points by Sept. 06th 2019. Meanwhile, the JP Morgan Emerging Markets’ Bond Index (EMBI) grew by 0.91% to close the week at 873.81 points. 

Lebanese officials announced the country in a “state of economic emergency”early- on in the week, which is expected to expedite public finance reforms. Therefore, the pressures on Lebanese Eurobonds were partially eased as reflected in the weekly index change.

Nonetheless, Lebanon’s 5-year credit default swaps (CDS) gained 11 basis points (bps) to settle at 1,227 bps by Sept. 06th.  As for the yields on the 5 year (5Y) and 10Y Lebanese Eurobonds, they dropped over the past week from 16.88% and 13.80% to 16.3% and 13.2%, respectively.

In the US, investors’ appetite for U.S. Treasuries (safe haven assets) eased, owing it to two main updates. Investors’ fears were partially offset by the Chinese Ministry of Commerce announcing US and China leaders will meet in Washington in October 2019. The news was in fact considered as the first positive development in the past weeks of escalating trade tensions and new tariffs slapped. Moreover, new data released this week by the ISM (Institute for Supply Management) revealed the US Services Index jumped to 56.4% in August compared to 53.7% in July, thereby also exceeding market expectations of a reading of 54.2%. In addition, US private sector employers added 195,000 jobs in August compared to 142,000 in July. Both economic figures shook off fears of a looming economic recession in the US.  Accordingly, yields on the 5Y and 10Y US treasuries grew by 3bps and 7 bps to 1.43% and 1.57%, respectively, over the week.

As such, the 5Y and 10Y spread between the yields on Lebanese Eurobonds and their US comparables narrowed by 61 and 67 bps, to settle at 1,487 and 1,163 bps by the week ending Sept. 06th.

Weekly Change of Lebanese Eurobonds Prices 

 

  Prices Weekly Yields Weekly
Maturity Coupon in % 05/09/2019 28/08/2019 Change 05/09/2019 28/08/2019 Change bps
12/04/2021 8.25 86.68 86.13 0.64% 18.18% 18.41% -23
04/10/2022 6.1 76.07 76.45 -0.49% 16.28% 15.98% 30
27/01/2023 6 73.92 74.65 -0.98% 16.30% 15.86% 44
22/04/2024 6.65 71.41 72.47 -1.46% 15.53% 15.07% 46
04/11/2024 6.25 70.07 69.89 0.25% 14.72% 14.73% -1
03/12/2024 7.00 71.38 72.58 -1.66% 15.08% 14.62% 46
26/02/2025 6.20 70.59 70.49 0.14% 14.08% 14.07% 1
12/06/2025 6.25 70.98 71.00 -0.03% 13.68% 13.63% 5
28/11/2026 6.60 68.38 68.74 -0.53% 13.60% 13.47% 13
23/03/2027 6.85 68.38 68.83 -0.66% 13.70% 13.55% 15
29/11/2027 6.75 68.25 68.08 0.25% 13.18% 13.20% -2
03/11/2028 6.65 68.34 68.06 0.42% 12.56% 12.61% -5
26/02/2030 6.65 68.34 67.22 1.67% 12.05% 12.29% -24
22/04/2031 7.00 68.01 67.28 1.08% 12.22% 12.37% -15
23/03/2032 7.00 68.63 67.72 1.34% 11.87% 12.04% -18
02/11/2035 7.05 68.63 67.74 1.31% 11.32% 11.48% -16
23/03/2037 7.25 68.63 67.86 1.12% 11.43% 11.56% -13

 

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