Following the resignation of Prime Minister Hassan Diab, diplomat Mustafa Adib was appointed as Prime Minister on Monday and started the formation of a new government . The new government’s priorities appear to be in line with a road map presented by French President Emmanuel Macron to Lebanon’s political leaders during his visit to Beirut this week to steer the country out of its economic crisis. In details, the next government will focus mainly on implementing long-overdue economic reforms, fighting endemic corruption in the public administration and reforming the electricity sector. These reforms will lead to the resumption of talks with the International Monetary Fund for a requested $10B bailout package, unlock foreign assistance to help Lebanon ride out the coronavirus crisis and rebuild the capital following the deadly Aug. 4 Beirut blast.
As a result ,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) rose this week significantly by 9.87% to stand at 16.59 points ( the highest since June 26, 2020) by the week ending September 4, 2020. Meanwhile, the JP Morgan EMBI rose from last week’s 899.39 to 911.24 points this week .
In the US, the 5Y and 10Y treasury yields declined this week to reach 0.24% and 0.63% compared to 0.31% and 0.74%, respectively as a stock-market selloff stimulated inflows into haven assets such as government paper. In details, Data this week showed private payrolls increased by 428,000 in August, about double that of July but well below Dow Jones estimates of 1.17 million. In fact, job gains are minimal, and businesses across all sizes and sectors have yet to come close to their pre-COVID employment levels
As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables narrowed from last week’s 6,199 bps and 4,624 bps to 5,816 bps and 4,347 bps, respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 9/3/2020 | 8/27/2020 | |
| Lebanon | N/A | N/A |
| KSA | 81 | 83 |
| Dubai | 145 | 165 |
| Brazil | 204 | 223 |
| Turkey | 515 | 534 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 09/03/2020 | 27/08/2020 | Change | 09/03/2020 | 27/08/2020 | Change bps |
| 10/4/2022 | 6.10 | 18.38 | 17.10 | 7.46% | 119.80% | 125.00% | -519 |
| 1/27/2023 | 6.00 | 17.82 | 16.30 | 9.34% | 105.99% | 112.03% | -604 |
| 4/22/2024 | 6.65 | 17.25 | 15.38 | 12.20% | 76.48% | 82.27% | -579 |
| 11/4/2024 | 6.25 | 17.43 | 15.95 | 9.26% | 66.87% | 70.73% | -387 |
| 12/3/2024 | 7.00 | 17.42 | 15.95 | 9.21% | 68.55% | 72.57% | -403 |
| 2/26/2025 | 6.20 | 17.43 | 15.80 | 10.28% | 63.37% | 67.57% | -419 |
| 6/12/2025 | 6.25 | 18.23 | 16.60 | 9.79% | 58.64% | 62.35% | -371 |
| 11/28/2026 | 6.60 | 17.43 | 15.70 | 10.99% | 52.13% | 56.02% | -389 |
| 3/23/2027 | 6.85 | 17.25 | 15.38 | 12.20% | 52.17% | 56.59% | -442 |
| 11/29/2027 | 6.75 | 17.43 | 15.71 | 10.93% | 48.73% | 52.53% | -379 |
| 11/3/2028 | 6.65 | 17.35 | 15.75 | 10.19% | 45.88% | 49.32% | -344 |
| 2/26/2030 | 6.65 | 17.00 | 15.78 | 7.74% | 44.12% | 46.83% | -271 |
| 4/22/2031 | 7.00 | 17.00 | 15.67 | 8.49% | 44.14% | 47.23% | -310 |
| 3/23/2032 | 7.00 | 17.35 | 16.08 | 7.88% | 42.62% | 45.48% | -286 |
| 11/2/2035 | 7.05 | 17.50 | 15.63 | 12.00% | 40.81% | 45.37% | -456 |
| 3/23/2037 | 7.25 | 17.63 | 15.75 | 11.90% | 41.43% | 46.15% | -471 |
Source: BLOMInvest Bank