BBI Partially Recovered:  Cabinet’s Draft Policy Statement Approved This Week

The BLOM Bond Index (BBI), a market value-weighted index tracking the performance of the Lebanese government Eurobonds market excluding coupon payments, added a weekly 4% (noting it had slumped by 12% last week) to stand at 43.13 points by Feb. 06th 2020. Meanwhile, the JP Morgan Emerging Markets’ Bond Index (EMBI) improved marginally, going from last week’s 896.06 points to this week’s 897.98 points.

According to BLOMInvest Bank’s data, the demand on the 5 year (5Y) and 10Y Lebanese Eurobonds rose over the past week with their yields sliding from 47.4% and 26.4% to 47.2% and 25.7%, respectively. In fact, this week’s highlight was the official approval of the Cabinet’s policy statement on Thursday. This last entails a set of measures and action plans to put forward Lebanon’s needed reforms that can help the Cabinet earn a vote of confidence to begin its work especially on the financial and economic fronts and ultimately unlock the international community’s money.

Worthy noting that the improvement remained partial, as the uncertainty regarding the fate of the maturing Eurobonds of March 09th 2020 looms ahead with Lebanon’s 5Y CDS hovering around an average of 3,611 basis points this week, compared to last week’s 3,714 points.

In the US, yields were driven up this week as investors’s jitters regarding the corona virus outbreak cooled off. Investor sentiment further improved as data on the USA’s manufacturing Purchasing Managers’ Index (PMI) stood at 50.9 points in January 2020, exceeding the market estimate of 48.5. Initial claims for unemployment benefits also declined by 15,000 to settle at 202,000 by February (the lowest since April 2018), while China’s Ministry of Finance announced slashed tariff rates on US goods effective Feb. 14th as a token to advance trade relations between the two economic giants.

Against this backdrop, the yields on the 5 year (5Y) and 10Y US treasuries climbed by 6 and 8 basis points (bps) to 1.45% and 1.65%, respectively, by the week ending Feb. 07th. In turn, the 5Y and 10Y spread between the yields on Lebanese Eurobonds and their US comparables narrowed by 26 bps and 72 bps to stand at 4,575 bps and 2,411 bps, respectively.

 

 Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields Weekly
Maturity Coupon in % 06/02/2020 30/01/2020 Change 06/02/2020 30/01/2020 Change bps
12/04/2021 8.25 50.58 46.84 8.00% 80.07% 88.38% -831
04/10/2022 6.1 40.14 39.50 1.62% 48.39% 48.96% -57
27/01/2023 6 38.88 38.62 0.67% 45.46% 45.57% -11
22/04/2024 6.65 38.79 37.09 4.59% 35.91% 37.38% -147
04/11/2024 6.25 38.96 37.17 4.83% 32.22% 33.61% -139
03/12/2024 7.00 38.27 36.86 3.82% 33.90% 35.02% -113
26/02/2025 6.20 38.04 37.01 2.78% 31.48% 32.22% -74
12/06/2025 6.25 38.57 37.64 2.46% 30.01% 30.64% -63
28/11/2026 6.60 37.79 36.58 3.30% 27.06% 27.82% -76
23/03/2027 6.85 37.66 36.75 2.48% 26.98% 27.53% -56
29/11/2027 6.75 37.36 36.73 1.73% 25.73% 26.09% -37
03/11/2028 6.65 37.52 35.77 4.90% 24.11% 25.11% -101
26/02/2030 6.65 37.07 35.39 4.75% 22.90% 23.82% -92
22/04/2031 7.00 37.00 35.30 4.80% 22.78% 23.71% -93
23/03/2032 7.00 37.01 35.21 5.11% 22.12% 23.09% -97
02/11/2035 7.05 37.16 35.39 5.00% 20.65% 21.56% -92
23/03/2037 7.25 37.01 35.40 4.55% 20.83% 21.68% -85

 

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