US Yields Down Despite US-China “phase one” trade deal

The BLOM Bond Index (BBI), a market value-weighted index tracking the performance of the Lebanese government Eurobonds market excluding coupon payments, retreated by 1.85% to close the week on January 17 at 48.36 points. Meanwhile, the JP Morgan Emerging Markets’ Bond Index (EMBI) recorded a 0.71% weekly uptick ending the week at 890.68 points.

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 38.80% and 22.45%, to 40% and 2.20%, respectively. As for the 5Y CDS,  it recorded a significant increase from 2,592  basis point by January 10, 2020  to 2,821  basis point by January 17, 2020. In fact, last-minute obstacles have delayed the formation of a new government that was expected to be announced this week which negatively affected  the performance  of  the Lebanese Eurobond Market

In the US, demand for treasuries was mainly driven by US-China “phase one” trade deal this week. In details, yields on the 5Y and 10Y US treasuries fell by 2 and 4 basis points (bps) to 1.63% and 1.81%, respectively, by the week ending Jan. 17. On Wednesday, the 2 countries signed a preliminary agreement following 2 years of tensions that have disturbed the global equity market. However, questions remain about details. In fact, while the deal will roll back some tariffs on Chinese goods, it also keeps tariffs in place on an estimated $360B of Chinese imports.

As such, the 5Y and 10Y spread between the yields on Lebanese Eurobonds and their US comparables rose by 122 bps and 79 bps to 3,837 bps and 2,139 bps respectively.

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

16/01/2019 09/01/2019
Lebanon               2,821                 2,592
KSA 62 61
Dubai 96 95
Brazil 98 98
Turkey 246 273

 

Weekly Change of Lebanese Eurobonds Prices

 

  Prices Weekly Yields Weekly
Maturity Coupon in % 16/01/2020 09/01/2020 Change 16/01/2020 09/01/2020 Change bps
12/04/2021 8.25 56.59 54.76 3.33% 63.92% 66.59% -266
04/10/2022 6.1 46.98 47.16 -0.38% 39.68% 39.27% 41
27/01/2023 6 43.73 44.69 -2.16% 39.42% 38.25% 118
22/04/2024 6.65 42.66 43.76 -2.51% 32.34% 31.40% 95
04/11/2024 6.25 42.73 43.76 -2.37% 29.17% 28.38% 79
03/12/2024 7.00 42.26 43.24 -2.27% 30.57% 29.80% 77
26/02/2025 6.20 42.10 43.37 -2.93% 28.31% 27.39% 91
12/06/2025 6.25 42.91 44.00 -2.47% 26.88% 26.14% 73
28/11/2026 6.60 41.79 43.34 -3.57% 24.55% 23.67% 88
23/03/2027 6.85 42.09 43.24 -2.65% 24.25% 23.60% 65
29/11/2027 6.75 41.82 43.34 -3.50% 23.14% 22.35% 79
03/11/2028 6.65 41.79 43.34 -3.57% 21.81% 21.06% 75
26/02/2030 6.65 41.32 43.12 -4.18% 20.73% 19.92% 82
22/04/2031 7.00 41.42 43.12 -3.93% 20.56% 19.81% 75
23/03/2032 7.00 41.81 43.10 -2.98% 19.81% 19.26% 55
02/11/2035 7.05 41.91 43.34 -3.28% 18.51% 17.95% 56
23/03/2037 7.25 41.96 43.51 -3.55% 18.56% 17.95% 61

 

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