Lebanese Eurobonds Experienced a Slight Improvement during the Week Ending October 3, 2014

02/10/201425/09/2014 ChangeYear to Date
BLOM Bond Index (BBI)*108.150108.1040.04%2.37%
Weighted Yield**5.17%5.15%215
Weighted Spread***3563497-74



Lebanon’s Eurobonds market maintained its stability during the week, where the BLOM Bond Index (BBI) increased by a slight 0.04%, to settle at 108.15 points. The gauge posted a 2.37% year-to-date (y-t-d) increase, mainly attributed to higher demand on short-term maturities. However, yields on the 5Y and 10Y Lebanese Eurobonds rose 5 bps and 2 bps to 5.14% and 6.21%, respectively.

As a result of the expected interest rate hike in the U.S next year, and the continuous disappointing performance of the Chinese Economy, investors displayed a “flight to quality” approach over the week. This was mirrored by the JP Morgan emerging countries’ bond index performance as itlost a weekly 0.84% to close at 675.21 points.

Investors’ attitude towards emerging bonds boosted demand for the U.S risk-free investments despite the above mentioned expected interest rates increase, as revealed by the $2.3B withdrawal from junk-bond funds. This return to the safe assets’ market sent the 5Y and 10Y U.S yields down by 5 bps and 8 bps to 1.70% and 2.44%, respectively. Correspondingly, the 5Y and 10Y spreads between the Lebanese Eurobonds and their U.S benchmark widened by 10bps each to 344 bps and 367 bps, respectively.

Lebanon’s Credit Default Swaps for 5 years (CDS) remained subdued at last week’s quote of 335-365 bps, while, in the region, the 5Y CDS quotes of Saudi Arabia and Dubai broadened from 47-52 bps and 155-165 bps to 51-57 bps and 161-171 bps, respectively. In emerging economies, the 5Y CDS of Brazil and Turkey also widened from 160-162 bps and 195-197 bps to 175-177 bps and 205-208 bps, respectively.

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