US Yields slightly rise as investors digest higher inflation

The Lebanese economy continues to suffer while policymakers are failing to apply the necessary reforms in order to unlock the international financial support. Moreover, according to the latest World Bank Lebanon Economic Monitor, the economic and financial crisis is likely to be in the top 10 and possibly in the top 3 most severe crises episodes globally since the mid-nineteenth century.

That said, 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), increased by 0.57%  to stand at 14.05 points by the week ending June 03, 2020 compared to the week of May 27, 2020. Meanwhile, the JP Morgan EMBI advanced from 915.48 to 916.86 during the period.

As such, the yields on the 5 year (5Y) and 10 year (10Y) Lebanese Eurobonds decreased by 130 basis points (bps) and 8 basis points (bps)  to end the period at 70.20%. and 55.82%, respectively.

In the US, the yields on 5 year and 10 yeald US treasuries, recorderd a increase  from the week ending of 27 May 2021 from 0.81% and 1.61% to end of the of week of 03 June, 2021 to 0.84% and 1.63%, respectively. In fact, US bond yields marked a rise this week after a strong recovery in the us economy. However, investors are concerned that higher inflation would lead the Federal bank to begin in tightening their monetary policy and further reducing their bond purchases.

As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable went down from the week of 27 May, 2021 from  7,069, bps and 5,429, bps to 6,936, bps and 5,419, bps, respectively.

Weekly Change of Lebanese Eurobonds Prices

 Source: BLOMInvest Bank