US Treasuries Down following the Rise in US Jobless Claims

Lebanon’s Prime Minister Hassan Diab and Finance Minister Ghazi Wazni signed this week a request for assistance from the International Monetary Fund. Previously, the council of ministers endorsed the Lebanese Government’s Financial Recovery Plan Which aims to implement long awaited reforms to the state administration, financial policy, the financial sector, the Central Bank and the balance of payments over a five year period. On the monetary level , the Lebanese pound accelerated its depreciation in the parallel market and reached unprecedented levels against the dollar, nurturing hyperinflation.

Accordingly, 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 increase  of 15.63% to 17.16 points by April 7, 2020. It followed that the yields on the 5 year (5Y) and 10Y Lebanese Eurobonds dropped from 110% and 46.8% last week, to 96.80% and 52%, respectively.

In the US, the yields on the 5 year (5Y) and 10Y US treasuries went from last week’s 0.36% and 0.64% respectively, to 0.29% and 0.63% this week. In fact, the drop is mainly due to the rise in U.S. weekly initial jobless claims due to the coronavirus-driven economic downturn. In details, according to the Labor Department, a  total of 3.2M Americans have filed for unemployment benefits in the week ending May 2. Worth mentioning that during the week the 5Y and 10Y US treasuries rose and reached 0.37% and 0.72% following the annoucment  of the Treasury department. In details , the Treasury Department said it’s introducing a 20-year bond coupon for the first time since the 1980s in an effort to push the record-setting debt levels further out in terms of duration. Moreover, the department is expecting the initial offering size of the 20-year bond to be $20 billion and the auction will take place on May 20. Meanwhile, investors are monitiring the reopening of state economies and smoldering tensions between Washington and Beijing over the coronavirus pandemic.

Correpondingly, the 5Y and 10Y spread between the yields on Lebanese Eurobonds and their US comparables retreated by the respective 1,313 bps and 519bps to stand at 9,651 bps and 4,617 bps this week

 

5 Year Credit Default Swaps, Mid-Prices (in basis points)

7/5/2020 30/04/2020
Lebanon  N/A  N/A
KSA 169 174
Dubai 276 307
Brazil 331 315
Turkey 592 597

 

 

Weekly Change of Lebanese Eurobonds Prices

 

  Prices Weekly Yields Weekly
Maturity Coupon in % 05/07/2020 30/04/2020 Change 05/07/2020 30/04/2020 Change bps
10/4/2022 6.10 17.88 16 102.08% 105.82% 115.86% -1004
1/27/2023 6.00 18.40 16.75 88.70% 91.70% 97.16% -546
4/22/2024 6.65 17.88 15.75 68.67% 70.10% 76.16% -606
11/4/2024 6.25 18.40 15.5 60.03% 61.24% 68.60% -736
12/3/2024 7.00 18.17 15.75 63.15% 63.62% 69.94% -633
2/26/2025 6.20 17.88 15.25 58.26% 59.10% 65.60% -651
6/12/2025 6.25 19.20 15.5 53.34% 54.16% 62.55% -839
11/28/2026 6.60 18.20 15.583 48.36% 49.26% 54.94% -569
3/23/2027 6.85 17.88 15.667 49.27% 49.56% 54.50% -495
11/29/2027 6.75 18.20 15.75 45.58% 46.35% 51.54% -519
11/3/2028 6.65 18.20 15.75 42.99% 43.73% 48.84% -510
2/26/2030 6.65 17.88 15.5 41.70% 41.82% 46.86% -504
4/22/2031 7.00 18.20 15.58 40.96% 41.59% 47.48% -589
3/23/2032 7.00 18.20 15.66 40.24% 40.66% 46.34% -569
11/2/2035 7.05 17.88 15.5 39.97% 40.13% 45.96% -583
3/23/2037 7.25 17.88 15.5 40.87% 40.83% 46.86% -603

 

Source: BLOMInvest Bank

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