The exacerbating economic, exchange rate, debt crises and false promises of a government formation will most likely contract the economy further. In the week ending May 6, 2021, the Lebanese pound was almost stable against the dollar for USD/LBP 12,400 in the parallel market, as traders awaited French foreign minister’s visit to Beirut to impose some corrective measures and push for government formation, after eight month of political deadlock.
On Thursday, French Foreign Minister Jean-Yves Le Drian arrived and had met with Lebanese leaders mainly President Michel Aoun and Parliament Speaker Nabih Berri. The visit concluded that France is ready to take punitive measures against those who were hindering any advancement efforts.
Moreover, the market was also awaiting news on the Central Bank’s launch of an electronic platform “Sayrafa” to organize exchange rate transactions, with all affiliated banks and money exchange dealers ready to participate. Nevertheless, it is expected to be postponed till next week.
However, 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 surge this week by 3.79% to stand at 13.61 points by the week ending 06 May 2021. Meanwhile, the JP Morgan EMBI went up by 0.44% by increasing from 905.02 last week to 908.96 points this week.
As a result, the yield of the 5 years (5Y) Lebanese Eurobonds decreased during this week from 75.15% to 73.00%, and the yield of the 10 years (10Y) Lebanese Eurobonds decreased from 58.50% to 56.60%.
Regarding the US market this week, US Treasury yields slightly downticked, with the 5Y and 10Y bond yield declining from 0.86% and 1.65% to 0.81% and 1.58%, respectively.
Since the Covid-19 pandemic, jobless claims in the US has escalated, however, it is worth noting that this week unemployment benefits in the U.S. reached a new low, fell 92,000 last week to 498,000, the Labor Department said on Thursday. Moreover, Treasury yields moved in a narrow range as bond traders largely indicated better-than-expected initial U.S. jobless claims data, as a result U.S. yields stayed relatively stable this week.
In fact, according to ‘Standard & Poor Global’, investors continue to seek the relative safety of US government bonds even as the domestic jobs picture improves and new highs are set in equity markets.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable went down from 7,429 bps and 5,685 to 7,119 bps and 5,502 bps, respectively.
| 5Y Credit Default Swaps (CDS) | ||
| 05/06/2021 | 29/4/2021 | |
| Lebanon | . | . |
| KSA | 67 | 66 |
| Dubai | 99 | 98 |
| Brazil | 185 | 206 |
| Turkey | 402 | 418 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 06/05/2021 | 29/04/2021 | Change | 06/05/2021 | 29/04/2021 | Change bps |
| 27/01/2023 | 6.00 | 13.00 | 12.68 | 2.50% | 185.95% | 186.56% | -61 |
| 22/04/2024 | 6.65 | 13.00 | 12.32 | 5.55% | 110.04% | 113.35% | -331 |
| 04/11/2024 | 6.25 | 13.00 | 12.71 | 2.30% | 93.83% | 94.70% | -87 |
| 03/12/2024 | 7.00 | 12.96 | 12.43 | 4.25% | 95.33% | 97.40% | -207 |
| 26/02/2025 | 6.20 | 13.13 | 12.64 | 3.86% | 86.22% | 87.98% | -176 |
| 12/06/2025 | 6.25 | 13.34 | 12.95 | 2.97% | 80.89% | 82.07% | -118 |
| 28/11/2026 | 6.60 | 13.33 | 12.79 | 4.22% | 67.31% | 69.05% | -174 |
| 23/03/2027 | 6.85 | 13.10 | 12.56 | 4.32% | 67.13% | 69.07% | -194 |
| 29/11/2027 | 6.75 | 13.07 | 12.53 | 4.29% | 63.15% | 64.96% | -181 |
| 03/11/2028 | 6.65 | 13.03 | 12.54 | 3.89% | 59.28% | 60.95% | -167 |
| 26/02/2030 | 6.65 | 13.22 | 12.75 | 3.67% | 54.99% | 56.57% | -158 |
| 22/04/2031 | 7.00 | 12.92 | 12.50 | 3.31% | 56.72% | 58.39% | -166 |
| 23/03/2032 | 7.00 | 13.08 | 12.72 | 2.83% | 55.04% | 56.44% | -140 |
| 02/11/2035 | 7.05 | 13.01 | 12.41 | 4.79% | 54.51% | 57.04% | -254 |
| 23/03/2037 | 7.25 | 13.63 | 13.08 | 4.21% | 53.09% | 55.30% | -221 |
Source: BLOMInvest Bank