The situation on the Lebanese ground remains critical. Prime minister-designate “Mostapha Adeeb” resigned on Saturday amid a political bottleneck over the formation of the next Cabinet. Choosing a cabinet and specifically assigning a finance minister was proved to be difficult in a country where political loyalties remain prevailing.
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) dropped this week by 7.71% to stand at 14.48 points by the week ending October 1, 2020. Meanwhile, the JP Morgan EMBI rose from last week’s 880.39 points to 886.64 points this week.
In the US, the 5Y treasury yields this week remained at 0.27% and the 10Y treasury yields slightly increased to reach 0.68% compared to 0.67% as U.S. private-sector employment rose by 749,000 jobs on Wednesday, reaching highest record in three months. Moreover, the U.S. consumer confidence index surged unexpectedly in September (standing at 101.08 from 86.3 in August) but remains below pre-pandemic levels, showing that Americans are optimistic about the general economic situation and labor market conditions. It is worth mentioning that treasury yields edged lower beginning of this week as the presidential debate was scheduled on Tuesday and as elections have approached, also reflecting the long period of uncertainty which could make the bond market more volatile.We can add that yields remained low in line with the increase in Covid-19 cases, however, the U.S. Treasury Secretary Steven Mnuchin explained that progress has been made towards new Covid-19 relief legislation in hope of reaching an effective agreement. As such, analysts explain that the market remains in line to what will happen with corporate profits, interest rates and Covid-19 pendamic.
Moreover, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables changed from last week’s 6,073 bps and 4,693 bps to 6,393 bps and 5,002 bps, respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 10/1/2020 | 9/24/2020 | |
| Lebanon | N/A | N/A |
| KSA | 89 | 102 |
| Dubai | 158 | 160 |
| Brazil | 247 | 248 |
| Turkey | 523 | 562 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 01/10/2020 | 24/09/2020 | Change | 01/10/2020 | 24/09/2020 | Change bps |
| 10/4/2022 | 6.10 | 15.88 | 18.00 | -11.81% | 138.97% | 130.84% | 813 |
| 1/27/2023 | 6.00 | 15.54 | 17.71 | -12.23% | 120.15% | 112.00% | 815 |
| 4/22/2024 | 6.65 | 15.00 | 17.25 | -13.04% | 85.77% | 80.79% | 497 |
| 11/4/2024 | 6.25 | 15.17 | 17.46 | -13.12% | 74.68% | 69.84% | 485 |
| 12/3/2024 | 7.00 | 15.21 | 17.42 | -12.68% | 76.47% | 72.35% | 413 |
| 2/26/2025 | 6.20 | 15.13 | 17.53 | -13.69% | 70.54% | 66.23% | 431 |
| 6/12/2025 | 6.25 | 16.08 | 18.46 | -12.87% | 64.68% | 61.25% | 343 |
| 11/28/2026 | 6.60 | 15.25 | 17.60 | -13.35% | 57.73% | 54.25% | 348 |
| 3/23/2027 | 6.85 | 15.13 | 17.38 | -12.95% | 57.83% | 54.52% | 331 |
| 11/29/2027 | 6.75 | 15.25 | 17.50 | -12.86% | 54.09% | 50.71% | 338 |
| 11/3/2028 | 6.65 | 15.08 | 17.17 | -12.14% | 51.37% | 48.11% | 326 |
| 2/26/2030 | 6.65 | 14.88 | 17.13 | -13.14% | 49.15% | 46.04% | 311 |
| 4/22/2031 | 7.00 | 14.92 | 17.30 | -13.77% | 49.63% | 45.84% | 380 |
| 3/23/2032 | 7.00 | 15.08 | 17.25 | -12.56% | 48.32% | 44.58% | 374 |
| 11/2/2035 | 7.05 | 15.25 | 17.38 | -12.23% | 46.61% | 43.48% | 313 |
| 3/23/2037 | 7.25 | 15.25 | 17.50 | -12.86% | 47.78% | 44.24% | 354 |
Source: BLOMInvest Bank