Prices of Lebanese Eurobonds Jolted this week upon News regarding Investments by the UAE & KSA

Lebanon’s BLOM Bond Index (BBI) compiled by BLOMInvest Bank recorded a weekly uptick of 2.69% in the week ending September 20th 2019, to settle at 76.68 points. The BBI surpassed the the JP Morgan Emerging Markets’ Bond Index (EMBI) which retreated by 0.22% to close the week at 865.17 points.

In fact, after weeks of declining Eurobonds’ prices owing it to the increasing Hezbollah-Israeli tensions grew and  talks reagarding the country’s delayed reforms, appetite for Lebanese 5 year (5Y) and 10Y Eurobonds rose this week and prices recovered. This largely came on the back of Saad Hairi’s statement on 19/09/2019 which announced the possibility of the UAE and KSA investing in 23 infrastructure projects on Lebanon’s agenda. The news partly restored investors’confidence in the Lebanese market, noting that the 5Y Lebanese Credit Default Swaps (CDS) fell by 67 points overnight, following Hariri’s upbeat news. As such, the 5Y CDS closed the week at 1,320 basis points (bps) by Sept. 09th

Moreover, it followed that the respective yields on the 5Y and 10Y Lebanese Eurobonds slipped from last week’s 18.60% and 14.15%, to 17.95% and 13. 6% this week.

In the US, the yields on 5Y and 10Y treasuries fluctuated during the week due to two main developments: the FED’s rate cut and the resumd trade talks between US and China. In details, demand on treasuries fell partly this week, thanks to the resumption of trade talks between China and the US for the first time in 2 months to lay the groundwork for October’s upcoming negotaitions. However, by Wednesday of this week, the demand on treasuries rose back up as the FED cut the overnight lending rate (which affects business and consumer loans) by 25 bps to the range of 1.75% to 2% for a second time since July 2019. This partly signaled some risks are still looming on the current positive outlook of the US economy, while divisons among policy-makers within the FED emerged. As such, over the week, the yields on the 10Y treasuries remained unchanged from alst week’s 1.79% while yields on the 5Y treasuries barely added 1bps to 1.66%.

As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables narrowed by 66 and 55 bps to end the week at 1629 and 1,181 bps, respectively, this week.

Weekly Change of Lebanese Eurobonds Prices

 

  Prices Weekly Yields Weekly
Maturity Coupon in % 19/09/2019 12/09/2019 Change 19/09/2019 12/09/2019 Change bps
12/04/2021 8.25 93.25 83.69 11.43% 11.59% 20.85% -925
04/10/2022 6.1 84.88 71.55 18.64% 11.04% 18.72% -769
27/01/2023 6 83.00 69.73 19.04% 11.23% 18.43% -720
22/04/2024 6.65 81.38 67.96 19.76% 11.36% 16.93% -557
04/11/2024 6.25 78.75 67.01 17.52% 11.26% 15.86% -460
03/12/2024 7.00 81.75 67.68 20.79% 11.27% 16.45% -518
26/02/2025 6.20 77.63 67.01 15.85% 11.29% 15.34% -405
12/06/2025 6.25 77.50 67.65 14.56% 11.20% 14.79% -359
28/11/2026 6.60 76.25 64.81 17.66% 11.17% 14.66% -349
23/03/2027 6.85 77.00 64.86 18.71% 11.17% 14.72% -356
29/11/2027 6.75 75.75 64.71 17.06% 11.08% 14.14% -306
03/11/2028 6.65 74.25 64.93 14.35% 10.97% 13.42% -244
26/02/2030 6.65 72.75 64.75 12.36% 10.92% 12.88% -196
22/04/2031 7.00 73.38 64.43 13.89% 10.98% 13.02% -204
23/03/2032 7.00 73.13 64.82 12.82% 10.86% 12.68% -181
02/11/2035 7.05 72.38 64.91 11.51% 10.59% 12.02% -143
23/03/2037 7.25 72.63 64.91 11.90% 10.68% 12.12% -144

 

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