Things in Lebanon are not getting better. More than one year passed on the default of the $1.2B Lebanese Eurobonds and no negociations with the holders have been started yet. However, the former Minister of Labor Kamil Abo Sleiman told Al Nahar today about the need to launch a public offer by the Lebanee government and the Central Bank to buy the defaulted Eurobonds at a price not exceeding the 15 cents, noting that its market price does not exceed the 13% of its nominal value. Abou Sleiman also added that by succeeding with this process we will extinguish a lart part of the external debt and achieve potential profits.
Nevertheless, Dr. Ayman Omar, a researcher in political and economic affairs, said that rebuying the defaulted Eurobonds today is going to make the depositors bear fiscal losses and negatively affect the subsidies of the essential products. He stated as well that this process wont be suitable for foreign Eurobonds holders since they can suit Lebanon in international courts and getting their full rights along with the interests and losses from delays in payments. He also claimed that Lebanon will lose his reputation and trust and any partial solution will not positively reflect on Lebanon.
As such, 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 slight downtick this week by 1.20% to stand at 11.96 points by the week ending 08 April 2021. Meanwhile, the JP Morgan EMBI went down by 0.28% by falling from 892.78 last week to 890.31 points this week.
As a result, the yield of the 5 years (5Y) Lebanese Eurobonds increased during this period from 78.35% to 79.15%, while the yield of the 10 years (10Y) Lebanese Eurobonds increased from 62% to 62.45% this week.
Regarding the US market this week, US Treasury yields slightly decreased with the 5Y and 10Y bond yield dropping from 0.90% and 1.69% to 0.85% and 1.64%, respectively. The decline was mainly driven by Fed Chairman Powell’s remarks about inflation as cautious and that he sees higher prices but not higher inflation in the coming period. Moreover, U.S. jobless claims also pushed down yields this week wehereas labor market is continuing to heal. Not to mention the fast recovery in U.S economy resulting from the stimulus and the rapid rollover of the vaccination
In turn, the 5Y spread between the yield on Lebanese Eurobonds and their US comparable went up from 7,745 bps to 7,830 bps; moreover the 10Y spread increased from 6,031 bps to 6,081 bps.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 8/4/2021 | 1/4/2021 | |
| Lebanon | . | . |
| KSA | 66 | 65 |
| Dubai | 100 | 105 |
| Brazil | 221 | 226 |
| Turkey | 439 | 459 |
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 08/04/2021 | 01/04/2021 | Change | 08/04/2021 | 01/04/2021 | Change bps |
| 27/01/2023 | 6.00 | 11.54 | 11.60 | -0.51% | 191.04% | 188.22% | 282 |
| 22/04/2024 | 6.65 | 11.56 | 11.81 | -2.12% | 115.79% | 113.46% | 232 |
| 04/11/2024 | 6.25 | 11.55 | 11.62 | -0.59% | 98.90% | 98.02% | 89 |
| 03/12/2024 | 7.00 | 11.37 | 11.43 | -0.52% | 101.58% | 100.78% | 79 |
| 26/02/2025 | 6.20 | 11.66 | 11.86 | -1.64% | 91.56% | 90.33% | 123 |
| 12/06/2025 | 6.25 | 11.75 | 12.01 | -2.13% | 86.25% | 84.77% | 148 |
| 28/11/2026 | 6.60 | 11.58 | 11.76 | -1.51% | 73.33% | 72.40% | 93 |
| 23/03/2027 | 6.85 | 11.55 | 11.76 | -1.79% | 73.09% | 72.11% | 98 |
| 29/11/2027 | 6.75 | 11.54 | 11.60 | -0.52% | 68.54% | 68.17% | 38 |
| 03/11/2028 | 6.65 | 11.55 | 11.58 | -0.25% | 64.54% | 64.30% | 24 |
| 26/02/2030 | 6.65 | 11.40 | 11.62 | -1.93% | 61.94% | 60.96% | 98 |
| 22/04/2031 | 7.00 | 11.55 | 11.62 | -0.66% | 62.48% | 62.02% | 46 |
| 23/03/2032 | 7.00 | 11.56 | 11.68 | -1.02% | 61.70% | 61.18% | 52 |
| 02/11/2035 | 7.05 | 11.57 | 11.57 | -0.05% | 60.86% | 60.76% | 10 |
| 23/03/2037 | 7.25 | 11.56 | 11.67 | -0.91% | 62.59% | 62.11% | 48 |
Source: BLOMInvest Bank