|18/02/2021||11/02/2021||Change||Year to Date|
|BLOM Bond Index (BBI)||13.96||14.78||-5.55%||-6.67%|
The political deadlock continues to shadow over the Lebanese situation. In detail, this week witnessed a massive decrease in the Lebanese pound against the US dollars and reached approximately LBP9500/$. Moreover, the depreciation of the national currency will have a big impact on the prices of goods and the inflation rate in the upcoming days. The deterioration of the national currency reflects the big uncertainty of the Lebanese political situation, as the conflict between P.M. Saad el Hariri and President Michel Aoun has reached its peak, regarding the formation of the new government.
Furthermore, Lebanon has been under lockdown due to the high number of coronavirus infections, which is considered among the strictest lockdowns in the world. However, there are glimmers of hope as Lebanon received its first doses of Pfizer’s vaccines, and the vaccination process already started this week.
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 5.55% to stand at 13.96 points by the week ending 18 February 2021. Meanwhile, the JP Morgan EMBI fell from last week’s 926.89 points to 917.70 points this week.
As such, the yield of the 5 year (5Y) and the 10 year (10Y) Lebanese Eurobonds increased during this period from 71.10% and 53.90% to 71.60% and 54.20%, respectively.
In the US, the economy continues to recover amid the massive vaccination rollout. In details, investors are bullish and headed to a riskier asset, amid expectations of more fiscal stimulus under a Democrat-led congress, which lifted yields to the recent highs. However, the increase in yields can be explained by another reason; Investors are avoiding to include US governmental bonds in their portfolio as the US giant stimulus plan will likely increase inflation. Further, and in order to protect the value of its portfolio, investors are bearish regarding the US fixed incomes. Hence, the US 5Y and 10Y increased during this week from 0.46% and 1.16% to 0.56% and 1.19%, respectively.
As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable widened from 7,064 bps and 5,274 bps to 7,104 bps and 5,291 respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
Weekly Change of Lebanese Eurobonds Prices
|Maturity||Coupon in %||18/02/2021||11/02/2021||Change||18/02/2021||11/02/2021||Change bps|
Source: BLOMInvest Bank