BBI Partially Picked-Up: MoF Re-emphasizes Plan to Safeguard Lebanon’s Foreign Currency Reserves

Over the week ending March 27^th, Lebanon’s Ministry of finance (MoF) re-confirmed that it will “take all measures it deems necessary to manage Lebanon’s limited foreign currency reserves”. The MoF also announced that Lebanon will halt paying all dollar Eurobonds and will hold an Investor Presentation on Friday 27^th , “to update holders of Lebanon’s Eurobonds on the latest macroeconomic developments and provide an overview of the government’s reform plan and the guiding principles for the public debt restructuring”.

Consequently, the BLOM Bond Index (BBI), BLOMInvest Bank’s market value-weighted index tracking the performance of the Lebanese government Eurobonds’ market excluding coupon payments, recorded a weekly uptick of 5.6% to 17.92 points by March 27^th. It followed that the yields on the 5 year (5Y) and 10Y Lebanese Eurobonds dropped from 112.50% and 53% last week, to 102.35% and 50.2%, respectively.

In the US, demand on US treasuries rallied despite the Senate passing a record-breaking bailout (relief package) of $2 trillion to shield the economy from the devastating impact of the coronavirus pandemic. On the counterpart, official data published this week showed that a record 3.3 million workers applied for unemployment benefits in the week ending March 21^st – this represents the “highest number of initial jobless claims in history”, since the Department of Labor started tracking the data in 1967. As a result,  the yields on the 5 year (5Y) and 10Y US treasuries went from last week’s 0.66% and 1.12%, respectively, to 0.51% and 0.83% this week.

Correpondingly, the 5Y and 10Y spread between the yields on Lebanese Eurobonds and their US comparables retreated by the respective 1,000 bps and 251bps to stand at 10,184 bps and 4,937 bps this week.

 Weekly Change of Lebanese Eurobonds Prices

Source: BLOMInvest Bank