Blom Bond Index Down this week Amid Currency Collapse

The BLOM Bond Index (BBI) which is BLOMInvest Bank’s market value-weighted index tracking the performance of the Lebanese government Eurobonds’ market (excluding coupon payments), dropped weekly by 1.31%  to stand at 15.82 points by the week ending July 10, 2020. Meanwhile, the JP Morgan EMBI advanced from last week’s 872.53 to 874.9points this week.

As such, the yields on the 5 year (5Y) and 10Y Lebanese Eurobonds rose by 100 basis points (bps) and 90bps, to end the week at 111% and 50.70%, respectively. Although the BBI has  started to record relatively higher values since mid-May and reached 18.59 points on June 12, it retreated again due the country’s deep financial crisis and currency deterioration. In fact, the collapse of the Lebanese currency is likely to further hurt recovery value, and increases the risk that creditor negotiations are unable to reach an agreement. Moreover,talks between the IMF and Lebanon over an initial 10 billion-dollar bailout have been snagged by a dispute between the government and central bank over the scale of losses in the banking system.

In the US, Treasury yields fell during the week after investors showed strong demand for a sale of long-term bonds, buoying trading for government debt. In details, the U.S. Treasury Department auction drew healthy appetite among investors for a record-large sale of $29B and $19B of 10-Y and 30-Y notes, respectively. Another factor supporting bond prices were the continued worries around the unabated spread of the COVID-19 pandemic across the majority of U.S. states, which has weighed on hopes for a swift return to a pre-coronavirus economy.As s result, the yields on 5Y and 10Y treasuries dropped by 1 and 6 bps to end the week at 0.28% and 0.62% respectively.

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

Weekly Change of Lebanese Eurobonds Prices

Source: BLOMInvest Bank