The depreciation of Lebanese Lira continues to hemorrhage for the third consecutive week. In details, the Lebanese pound has reached $10,000/LBP by the week ending 05 March 2021. The Lebanese purchasing power eroding as most of the Lebanese people are being paid in Lebanese pound. As a result, Protesters took to the streets across Lebanon. All this is happening with no progress on the formation of the new Cabinet. Hence, the formation of a government is necessary to stop the collapse and speed up negotiations with the IMF in order to reaccelerate the Lebanese economy.
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 4.15% to stand at 13.38 points by the week ending 05 March 2021. Meanwhile, the JP Morgan EMBI fell slightly from last week’s 898.70 points to 898 points this week.
As such, the yield of the 5 year (5Y) and the 10 year (10Y) Lebanese Eurobonds increased during this period from 71.70% and 54.70% to 72.55% and 56.85%, respectively.
In the US, the economy continues to recover from corona virus pandemic amid the increase of number of people vaccinated. On the other hand, the Federal Reserve Chairman “Jerome Powell” said Thursday that he expects some inflationary pressures in the time ahead but they likely won’t be enough to spur the central bank to hike interest rates. As a result, the 10 Year yield has increased above 1.5%, as the economic recovery combined with the statement of Federal reserve and the growing concern about inflation have left the long term US government bonds unattractive financial instruments for investors.
As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable widenned from 7,089 bps and 5,316 bps to 7,178 bps and 5,531 respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 4/3/2021 | 25/2/2021 | |
| Lebanon | . | . |
| KSA | 69 | 62 |
| Dubai | 107 | 105 |
| Brazil | 197 | 185 |
| Turkey | 329 | 309 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 04/03/2021 | 25/02/2021 | Change | 04/03/2021 | 25/02/2021 | Change bps |
| 1/27/2023 | 6.00 | 12.96 | 12.94 | 0.15% | 168.03% | 166.25% | 178 |
| 4/22/2024 | 6.65 | 13.06 | 13.35 | -2.20% | 103.91% | 101.77% | 214 |
| 11/4/2024 | 6.25 | 13.12 | 13.25 | -1.00% | 89.11% | 88.08% | 103 |
| 12/3/2024 | 7.00 | 12.75 | 12.85 | -0.72% | 92.50% | 91.67% | 83 |
| 2/26/2025 | 6.20 | 13.23 | 13.37 | -1.11% | 83.28% | 82.42% | 87 |
| 6/12/2025 | 6.25 | 13.25 | 13.52 | -2.05% | 78.59% | 77.27% | 132 |
| 11/28/2026 | 6.60 | 13.04 | 13.37 | -2.49% | 66.91% | 65.62% | 129 |
| 3/23/2027 | 6.85 | 12.78 | 13.23 | -3.44% | 67.43% | 65.60% | 183 |
| 11/29/2027 | 6.75 | 12.79 | 13.30 | -3.85% | 63.15% | 61.29% | 186 |
| 11/3/2028 | 6.65 | 12.88 | 13.06 | -1.33% | 58.94% | 58.26% | 68 |
| 2/26/2030 | 6.65 | 12.75 | 12.94 | -1.42% | 56.55% | 55.91% | 64 |
| 4/22/2031 | 7.00 | 12.75 | 12.78 | -0.20% | 56.95% | 56.80% | 15 |
| 3/23/2032 | 7.00 | 12.81 | 13.24 | -3.26% | 56.08% | 54.37% | 171 |
| 11/2/2035 | 7.05 | 12.71 | 13.45 | -5.49% | 55.33% | 52.39% | 294 |