BBI Slumped this week as Cabinet Meetings & IMF Discussions explore Lebanon’s Options for Maturing Eurobonds

The BLOM Bond Index (BBI), a market value-weighted index tracking the performance of the Lebanese government Eurobonds market excluding coupon payments, fell by a weekly 8.03% to stand at 33.35 points by Feb. 21st 2020. Meanwhile, the JP Morgan Emerging Markets’ Bond Index (EMBI) improved by a marginal 0.55% to end the week at 905.52 points. 

According to BLOMInvest Bank’s data, the 5Y Lebanon Credit Default Swaps (CDS) surged to 7,973 basis points (bps) by the week ending Feb. 20th compared to last week’s 5,128 bps. This reflects heightened investors’ concerns over the possibility of a default by the Lebanese government on upcoming maturing Eurobonds on March 09th. In fact, the closer Lebanon moves towards March 09th without a clear decision (to-date) on whether to settle the payment and/or restructure the debt, the more critical is the impact on the yields. In detail, the yields on the 5 year (5Y) and 10Y Lebanese Eurobonds rose from last week’s 55.8% and 29.7% to this week’s 61.2% and 31.7%, respectively.

Moreover, the IMF arrived this week to hold further discussions with the Cabinet that summoned it for technical assistance. These developments were accompanied with a sense of urgency that arose this week regarding Lebanon’s action plan to begin addressing the financial and economic crisis it is grappling with, including its maturing debt in eurobonds.

 In the US, the yields on the 5 year (5Y) and 10Y US treasuries fell by 6 and 9 basis points (bps) to 1.37% and 1.52%, respectively, by the week ending Feb. 20th. In fact, demand on US treasuries rose this week owing it to heightened conerns regarding the outbreak of the corona virus, noting that the FED’s minutes out this week had identified  coronavirus as a “new risk to global growth.”

Correpondingly, the 5Y and 10Y spread between the yields on Lebanese Eurobonds and their US comparables rose from 4,575 bps and 2,411 bps last week to 5,983 bps and 3,018 bps, respectively.

 

  Weekly Change of Lebanese Eurobonds Prices

  Prices Weekly Yields Weekly
Maturity Coupon in % 20/02/2020 13/02/2020 Change 20/02/2020 13/02/2020 Change bps
12/04/2021 8.25 33.28 38.75 -14.12% 141.52% 116.70% 2482
04/10/2022 6.1 30.84 34.22 -9.88% 63.50% 57.26% 624
27/01/2023 6 30.75 33.02 -6.88% 57.48% 53.60% 388
22/04/2024 6.65 31.10 32.76 -5.06% 44.17% 42.09% 208
04/11/2024 6.25 30.55 32.84 -6.97% 40.27% 37.76% 251
03/12/2024 7.00 30.38 32.42 -6.28% 41.77% 39.43% 234
26/02/2025 6.20 30.18 32.65 -7.57% 38.83% 36.22% 261
12/06/2025 6.25 30.82 33.29 -7.42% 36.76% 34.35% 241
28/11/2026 6.60 29.35 32.11 -8.59% 33.65% 31.21% 244
23/03/2027 6.85 30.10 32.29 -6.79% 32.76% 30.86% 190
29/11/2027 6.75 29.54 31.82 -7.16% 31.46% 29.56% 190
03/11/2028 6.65 29.88 31.91 -6.35% 29.29% 27.72% 157
26/02/2030 6.65 30.21 32.16 -6.06% 27.30% 25.89% 141
22/04/2031 7.00 30.04 31.76 -5.40% 27.24% 25.99% 125
23/03/2032 7.00 30.28 31.88 -5.00% 26.33% 25.19% 114
02/11/2035 7.05 30.48 32.09 -5.01% 24.64% 23.53% 111
23/03/2037 7.25 30.50 31.96 -4.56% 24.84% 23.80% 104

 

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