The BLOM Bond Index (BBI), a market value-weighted index tracking the performance of the Lebanese government Eurobonds market excluding coupon payments, witnessed a significant weekly drop by 12.07% to close the week on January 31 at 41.47 points. Meanwhile, the JP Morgan Emerging Markets’ Bond Index (EMBI) recorded a 0.60% weekly uptick ending the week at 896.06 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 41.40% and 24.30%, to 47.40% and 26.40%, respectively. As for the 5Y CDS, it recorded an important increase from 2,821 basis point by January 23, 2020 to 3,757 basis point by January 30, 2020. In fact, although the Lebanese parliament approved the country’s 2020 budget on Monday targeting a 6% deficit, many consider that this budget will not solve the country’s economic crisis given that it was prepared several months ago by the previous government. Moreover, investors are waiting to see government decision concerning debt service and the payment of the $2.1 billion bond maturing in March 2020.
In the US, Government bond prices rose as investors fled to safety amid growing uncertainty over the potential economic fallout from the deadly coronavirus, following reports of an increase in number of cases and deaths attributed to the illness. At least 170 people have died in China, and nearly 8,000 have been sickened, based on official reports. Meanwhile,the FED kept its benchmark interest rate at a range between 1.50% to 1.75% on Wednesady. It underlined that economic growth was expanding at a moderate pace, and that the current monetary policy stance was supportive of inflation returning to the 2% target.. In details, yields on the 5Y and 10Y US treasuries fell by 16 and 27 basis points (bps) to 1.39% and 1.57%, respectively, by the week ending Jan. 31.
As such, the 5Y and 10Y spread between the yields on Lebanese Eurobonds and their US comparables rose by 148 bps and 117 bps to 4,601 bps and 2,483 bps, respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 1/30/2020 | 1/24/2020 | |
| Lebanon | 3,757 | 2,821 |
| KSA | 67 | 62 |
| Dubai | 94 | 96 |
| Brazil | 98 | 98 |
| Turkey | 243 | 246 |
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 1/30/2020 | 1/23/2020 | Change | 1/30/2020 | 1/23/2020 | Change bps |
| 4/12/2021 | 8.25 | 46.84 | 54.03 | -13.31% | 88.38% | 70.11% | 1827 |
| 10/4/2022 | 6.1 | 39.50 | 46.04 | -14.20% | 48.96% | 40.91% | 804 |
| 1/27/2023 | 6 | 38.62 | 42.92 | -10.01% | 45.57% | 40.48% | 509 |
| 4/22/2024 | 6.65 | 37.09 | 41.82 | -11.33% | 37.38% | 33.12% | 426 |
| 11/4/2024 | 6.25 | 37.17 | 41.97 | -11.45% | 33.61% | 29.78% | 383 |
| 12/3/2024 | 7.00 | 36.86 | 40.88 | -9.85% | 35.02% | 31.66% | 336 |
| 2/26/2025 | 6.20 | 37.01 | 41.52 | -10.86% | 32.22% | 28.78% | 344 |
| 6/12/2025 | 6.25 | 37.64 | 41.89 | -10.15% | 30.64% | 27.59% | 305 |
| 11/28/2026 | 6.60 | 36.58 | 41.27 | -11.36% | 27.82% | 24.88% | 295 |
| 3/23/2027 | 6.85 | 36.75 | 41.03 | -10.42% | 27.53% | 24.88% | 266 |
| 11/29/2027 | 6.75 | 36.73 | 40.86 | -10.11% | 26.09% | 23.68% | 242 |
| 11/3/2028 | 6.65 | 35.77 | 41.06 | -12.87% | 25.11% | 22.19% | 292 |
| 2/26/2030 | 6.65 | 35.39 | 40.22 | -12.01% | 23.82% | 21.27% | 256 |
| 4/22/2031 | 7.00 | 35.30 | 40.87 | -13.62% | 23.71% | 20.83% | 289 |
| 3/23/2032 | 7.00 | 35.21 | 40.93 | -13.96% | 23.09% | 20.21% | 288 |
| 11/2/2035 | 7.05 | 35.39 | 40.89 | -13.44% | 21.56% | 18.93% | 263 |
| 3/23/2037 | 7.25 | 35.40 | 40.85 | -13.34% | 21.68% | 19.03% | 265 |