The deterioration of the Lebanese economy continues to shadow over the whole country. In details, the Lebanese pound has witnessed more deterioration this week, and reached LBP15000/$ on the parallel market. This dangerous devaluation in Lebanese Lira can be explained by the political deadlock and the failure to form the awaited government. In fact, the deterioration of Lebanese lira will have catastrophic effect on the Lebanese citizens, as this devaluation will definitely have a huge impact on the prices of essential goods. As a result, Lebanon is heading to chaos and more protests are expected to happen on the streets in the upcoming weeks, as Lebanese people will suffer to secure their basic needs.
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) observed a downtick this week by 5.20% to stand at 12.59 points by the week ending 18 March 2021. Meanwhile, the JP Morgan EMBI fell slightly from last week’s 895.48 points to 892.35 points this week.
As such, the yield of the 5 year (5Y) and the 10 year (10Y) Lebanese Eurobonds increased during this period from 73.10% and 57.10% to 76.05% and 59.62%, respectively.
The projections of the Fed are pushing the yields forward. In details, the central bank concluded on Wednesday after its meeting, that the economic growth will be stronger then expected, forecasting gross domestic product to rise to 6.5% in 2021. This up from the 4.2% GDP forecast increase in December. Also, the Fed expects that the inflation hit 2.2% this year. As a result, the investors have more then one reason to head to another investment tools like stock market, as the fears of inflation is growing up while the Fed have no intentions to interfere regarding the interest rates.
As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable widenned from 7,232 bps and 5,556 bps to 7,519 bps and 5,791 respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 5Y Credit Default Swaps (CDS) | ||
| 18/03/2021 | 11/03/2021 | |
| Lebanon | . | . |
| KSA | 62 | 63 |
| Dubai | 99 | 100 |
| Brazil | 197 | 197 |
| Turkey | 308 | 320 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 18/03/2021 | 11/03/2021 | Change | 18/03/2021 | 11/03/2021 | Change bps |
| 27/01/2023 | 6.00 | 12.26 | 12.91 | -5.00% | 177.93% | 170.28% | 766 |
| 22/04/2024 | 6.65 | 12.32 | 13.16 | -6.40% | 109.14% | 104.03% | 511 |
| 04/11/2024 | 6.25 | 12.26 | 13.18 | -6.97% | 93.87% | 89.27% | 460 |
| 03/12/2024 | 7.00 | 12.02 | 12.78 | -5.92% | 96.82% | 92.74% | 407 |
| 26/02/2025 | 6.20 | 12.36 | 13.06 | -5.34% | 87.47% | 84.21% | 326 |
| 12/06/2025 | 6.25 | 12.54 | 13.20 | -5.05% | 81.96% | 79.02% | 294 |
| 28/11/2026 | 6.60 | 12.24 | 12.97 | -5.64% | 70.14% | 67.28% | 287 |
| 23/03/2027 | 6.85 | 12.27 | 12.75 | -3.80% | 69.79% | 67.71% | 208 |
| 29/11/2027 | 6.75 | 12.12 | 12.59 | -3.75% | 65.86% | 63.97% | 189 |
| 03/11/2028 | 6.65 | 12.20 | 12.84 | -4.99% | 61.58% | 59.15% | 243 |
| 26/02/2030 | 6.65 | 12.25 | 12.49 | -1.95% | 58.42% | 57.51% | 92 |
| 22/04/2031 | 7.00 | 12.12 | 12.75 | -4.96% | 59.65% | 57.01% | 265 |
| 23/03/2032 | 7.00 | 12.19 | 12.72 | -4.18% | 58.82% | 56.44% | 238 |
| 02/11/2035 | 7.05 | 12.15 | 12.85 | -5.48% | 57.89% | 56.27% | 163 |
| 23/03/2037 | 7.25 | 12.23 | 12.81 | -4.57% | 59.34% | 56.62% | 271 |
Source: BLOMInvest Bank