The Lebanese lira registered a sharp depreciation against the US dollar (USD) on Thursday of this week as it traded at highs of LBP 3,800 in the parallel market. The heignthened demand on US bank notes by citizens spiked and this came hand-in-hand with BDL’s new Circular No.151 mainly linked to perform all dollar withdrawl operations at the current market rate rather than the official (peg) rate. These factors combined fueled protests, especially in front of BDL headquarters in Beirut. Meanwhile, the government also extended the national lockdown until May 10th in its fight against the coronavirus and its economic spillovers on the country.
Against this backdrop, the BLOM Bond Index (BBI), a market value-weighted index tracking the performance of the Lebanese government Eurobonds’ market excluding coupon payments, slumped by a weekly 17.22% to close the week ending April 23rd at a historical low of 15.00 points. In its turn, the JP Morgan Emerging Markets index slipped by a weekly 0.94% to 782.73 points.
In their turn, yields on the 5 year (5Y) and 10Y Lebanese Eurobonds sky-rocketed from last week’s 92.5% and 45%, to 107.5% and 50.4%, respectively, this week.
In the US, demand on treasuries fluctuated throughout the week. On one hand, investors flocked to safe haven investments as the labour market pursued its historical decline with a substantial 4.43M filing for unemployment benefits, compared to last week’s 5.24M. Moreover, yields on US treasuries further fell as the US prices of oil contracts plunged below zero for the first time in history, with the coronavirus pandemic hammering demand. On another hand, the U.S. Senate early this week passed legislation to provide $484B in emergency aid for small businesses, hospitals and testing. In addition, talks on re-opening the economy also helped to partially offset the downward pressure on treasury yields. As such, the yields on the 5 year (5Y) US treasuries recorded a marginal change, adding 2 basis points to 0.37% this week. Meanwhile, the yields on the 10Y treasuries remained unchanged, ending the week at 0.61% by the week ending April 23rd.
Correspondingly, the 5Y and 10Y spread between the yields on Lebanese Eurobonds and their US comparables climbed from 9,215 bps and 4,439 bps last week to 10,713 bps and 4,979 bps, respectively, this week.
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 23/04/2020 | 16/04/2020 | Change | 23/04/2020 | 16/04/2020 | Change bps |
| 04/10/2022 | 6.1 | 15.75 | 19.00 | 102.08% | 113.74% | 99.12% | 1462 |
| 27/01/2023 | 6 | 15.58 | 19.28 | 88.70% | 101.19% | 86.95% | 1425 |
| 22/04/2024 | 6.65 | 15.75 | 19.00 | 68.67% | 75.83% | 66.38% | 944 |
| 04/11/2024 | 6.25 | 15.58 | 19.28 | 60.03% | 67.95% | 58.54% | 941 |
| 03/12/2024 | 7.00 | 15.58 | 18.75 | 63.15% | 69.93% | 61.36% | 857 |
| 26/02/2025 | 6.20 | 15.75 | 19.00 | 58.26% | 63.96% | 56.13% | 783 |
| 12/06/2025 | 6.25 | 16.58 | 20.08 | 53.34% | 59.51% | 51.97% | 754 |
| 28/11/2026 | 6.60 | 15.58 | 19.28 | 48.36% | 54.80% | 46.94% | 785 |
| 23/03/2027 | 6.85 | 15.75 | 19.00 | 49.27% | 54.20% | 47.19% | 701 |
| 29/11/2027 | 6.75 | 16.25 | 18.98 | 45.58% | 50.23% | 44.67% | 556 |
| 03/11/2028 | 6.65 | 16.25 | 19.28 | 42.99% | 47.50% | 41.61% | 589 |
| 26/02/2030 | 6.65 | 15.75 | 19.00 | 41.70% | 46.21% | 39.75% | 645 |
| 22/04/2031 | 7.00 | 16.25 | 19.28 | 40.96% | 45.66% | 39.48% | 618 |
| 23/03/2032 | 7.00 | 16.25 | 19.28 | 40.24% | 44.82% | 38.67% | 616 |
| 02/11/2035 | 7.05 | 15.75 | 19.00 | 39.97% | 45.15% | 37.80% | 735 |
| 23/03/2037 | 7.25 | 15.75 | 19.00 | 40.87% | 46.10% | 38.51% | 759 |
Source: BLOMInvest Bank