US Treasury Yields Down This Week Amid Disappointing Jobless CLaims

Efforts to get Lebanon’s leaders to agree on a new government by mid-September in order to start fixing the country’s problems have yet to bear fruit. The cabinet formation process has hit a deadlock over the demand of Lebanon’s two dominant Shia parties -the Hezbollah and its ally the Amal Movement – to name Shia ministers in the cabinet including the finance minister. Moreover, Lebanese President Michel Aoun said on Monday that the country was going “to hell” if a government is not formed as French efforts to encourage the formation of a new cabinet falter.

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) slumped this week by 5.42% to stand at 15.69 points by the week ending September 24, 2020. Meanwhile, the JP Morgan EMBI fell from last week’s 900.09 points to 880.39 points this week.

In the US,  the 5Y and 10Y treasury yields slightly decreased this week to reach 0.27% and 0.67% compared to 0.28% and 0.69%, respectively after the latest weekly jobless claims data came in worse than expected. In details, US first-time applications for jobless benefits  for the week ending Sept. 19 rose by 4,000 to 870,000, higher than the 850,000 consensus estimate. The number of Americans continuing to file for unemployment benefits stood at 12.58M, versus a forecast of 12.3M. The U.S. economic recovery, COVID-19, the election, stimulus negotiations and a weak jobs market are reasons to be keep investors concerned.

As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables changed from last week’s 5,792 bps and 4,311 bps to 6,073 bps and 4,693 bps, respectively.

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

Weekly Change of Lebanese Eurobonds Prices  

  Source: BLOMInvest Bank