This week Lebanon was engaged in many negotiations, from forming a government to the ongoing maritime border talks. In details, Prime Minister-designate Saad Hariri promised to form a government of specialists away from known political figures in response to the citizens protests and demands. Moroever, the government is expected to pull Lebanon from the worsening economic situation and financial instability in order to attract international financial support.
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) slightly declined this week by 0.22% to stand at 13.33 points by the week ending October 28, 2020. Meanwhile, the JP Morgan EMBI dropped from last week’s 890.12 points to 886 points this week.
In the US, the 5Y treasury yields remained at 0.38% while the 10Y treasury yields went down from 0.87% to 0.85% this week. In fact, treasury yields continued to decline during this week as investors are still alarmed about the COVID-19 outbreak’s wide spread and after the failure of the economic aid package agreement before the November 3 elections. However, US treasury yields rose on Wednesday as a result of the decline in the unemployment claims, to 7-month low of 751,000, in the week through October 24.
It is worth mentioning that analysts expect a sell-off of US Government Bonds and therefore presumably a rise in the US treasury yields as the US presendential elections approach and as ancipations show that Democratic candidate Joe Biden might be elected.
As a result, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables changed from last week’s 6,822 bps and 5,363 bps to 6,892 bps and 5,215 bps, respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 10/29/2020 | 10/22/2020 | |
| Lebanon | N/A | N/A |
| KSA | 85 | 72 |
| Dubai | 143 | 141 |
| Brazil | 217 | 213 |
| Turkey | 556 | 511 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 28/10/2020 | 22/10/2020 | Change | 28/10/2020 | 22/10/2020 | Change bps |
| 04/10/2022 | 6.10 | 14.50 | 14.50 | 0.00% | 153.67% | 152.29% | 138 |
| 27/01/2023 | 6.00 | 14.21 | 14.31 | -0.68% | 131.81% | 130.11% | 170 |
| 22/04/2024 | 6.65 | 13.75 | 13.75 | 0.00% | 92.71% | 92.30% | 41 |
| 04/11/2024 | 6.25 | 14.03 | 14.13 | -0.74% | 80.12% | 79.28% | 84 |
| 03/12/2024 | 7.00 | 13.58 | 13.58 | 0.02% | 83.98% | 83.35% | 63 |
| 26/02/2025 | 6.20 | 13.95 | 14.05 | -0.71% | 75.31% | 74.67% | 63 |
| 12/06/2025 | 6.25 | 14.75 | 14.85 | -0.67% | 69.46% | 68.86% | 59 |
| 28/11/2026 | 6.60 | 14.10 | 14.20 | -0.70% | 61.54% | 61.08% | 46 |
| 23/03/2027 | 6.85 | 13.88 | 13.88 | -0.04% | 61.79% | 61.69% | 10 |
| 29/11/2027 | 6.75 | 14.10 | 14.20 | -0.70% | 57.72% | 57.27% | 44 |
| 03/11/2028 | 6.65 | 13.95 | 13.75 | 1.45% | 54.98% | 55.40% | -42 |
| 26/02/2030 | 6.65 | 13.63 | 13.63 | -0.04% | 52.84% | 52.79% | 5 |
| 22/04/2031 | 7.00 | 13.95 | 14.05 | -0.71% | 52.93% | 52.45% | 48 |
| 23/03/2032 | 7.00 | 14.03 | 14.13 | -0.74% | 51.51% | 51.15% | 36 |
| 02/11/2035 | 7.05 | 14.00 | 14.00 | 0.00% | 50.85% | 50.72% | 13 |
| 23/03/2037 | 7.25 | 14.00 | 14.00 | 0.00% | 51.86% | 51.82% | 4 |
Source: BLOMInvest Bank