This week, Lebanon opens the door towards resolving the upsurge in the Covid-19 pandemic by imposing a new lockdown strategy for the coming two weeks, starting November 14th, and subject to extension. The lockdown was a result of the resurging cases whereby hospitals lack the capacity and capability of receiving critical cases, despite the fact that the Lockdown will act as a burden on the economic situation and will add up to its cost. Moreover, this week witnessed sanctions levied on the Lebanese Politician Gebran Bassil, by the Trump administration, accusing him of playing a major role in corruption in the country.
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 by 2.22% to stand at 13.79 points by the week ending November 12, 2020. Meanwhile, the JP Morgan EMBI increased from last week’s 905.84 points to 912.72 points this week.
In the US, the 5Y treasury yields rose from 0.33% to 0.40% as well as the 10Y treasury yields from 0.79% to 0.88% this week. In fact, Ten year yields hit eight-month highs on Monday, as news on a potential Covid-19 vaccine is about to develop, thus adding hopes of a stable U.S. recovery. It is worth noting that “reflation trade” – the case when bonds are sold in anticipation of new issues on the horizon – as a result of a fiscal stimulus deal to take place after the US presidential elections, faded away after new vaccine prospects. As such, Investors moved out of government debt investments, pushing 10-year Treasury note higher on Monday.
Moreover, Labor Department reported on Thursday, that unemployment claims declined from 757,000 claim to 709,000 for the week ending November 7th, reflecting that laid-off workers have been recalled to jobs or hired, which generate positive predictions for the rebounding of the US economy.
As a result, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables declined from last week’s 6,777 bps and 5,141 bps to 6,770 bps and 5,022 bps, respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 12/11/2020 | 05/11/2020 | |
| Lebanon | N/A | N/A |
| KSA | 66 | 73 |
| Dubai | 122 | 129 |
| Brazil | 178 | 195 |
| Turkey | 406 | 518 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 12/11/2020 | 05/11/2020 | Change | 12/11/2020 | 05/11/2020 | Change bps |
| 04/10/2022 | 6.10 | 14.72 | 14.38 | 2.43% | 155.19% | 156.13% | -94 |
| 27/01/2023 | 6.00 | 14.64 | 14.51 | 0.90% | 131.63% | 131.20% | 43 |
| 22/04/2024 | 6.65 | 14.31 | 13.88 | 3.16% | 90.99% | 92.50% | -151 |
| 04/11/2024 | 6.25 | 14.53 | 14.37 | 1.13% | 78.89% | 79.23% | -34 |
| 03/12/2024 | 7.00 | 14.58 | 14.25 | 2.31% | 80.83% | 81.71% | -88 |
| 26/02/2025 | 6.20 | 14.65 | 14.48 | 1.16% | 73.41% | 73.73% | -32 |
| 12/06/2025 | 6.25 | 15.25 | 15.20 | 0.33% | 68.42% | 68.33% | 9 |
| 28/11/2026 | 6.60 | 14.59 | 14.37 | 1.55% | 60.39% | 60.89% | -50 |
| 23/03/2027 | 6.85 | 14.38 | 13.88 | 3.64% | 60.37% | 61.86% | -149 |
| 29/11/2027 | 6.75 | 14.40 | 14.40 | -0.03% | 57.06% | 56.94% | 13 |
| 03/11/2028 | 6.65 | 14.42 | 14.33 | 0.64% | 53.69% | 53.94% | -25 |
| 26/02/2030 | 6.65 | 14.25 | 13.75 | 3.60% | 51.02% | 52.47% | -145 |
| 22/04/2031 | 7.00 | 14.46 | 14.33 | 0.94% | 51.27% | 51.71% | -43 |
| 23/03/2032 | 7.00 | 14.67 | 13.58 | 7.97% | 49.49% | 52.98% | -349 |
| 02/11/2035 | 7.05 | 14.49 | 14.13 | 2.59% | 49.16% | 50.43% | -127 |
| 23/03/2037 | 7.25 | 14.40 | 14.13 | 1.96% | 50.39% | 51.38% | -99 |
Source: BLOMInvest Bank