US Yields slips to a 3 month low level

The performance of the Eurobonds market in Lebanon is highly correlated with the domestic and geopolitical issues. However, High volatility in its prices has been significantly remarkable since the default occurred on March,2020. Investors are stuck holding non-interest bearing instruments with an unknown recovery date. In addition, Bonds prices depend on the debt restructuring plan, negotiations with investors and on an outcome of the rescue plan. Once these steps will be set on table, the bonds market should start to witness an increase in its prices.

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), decreased by 0.28%  to stand at 14.01 points by the week ending June 10, 2021 compared to the week of June 03, 2021. Meanwhile, the JP Morgan EMBI advanced from 916.86 to 925.89 during the period.

As such, the yields on the 5 year (5Y) Lebanese Eurobonds increased by 100 basis points (bps) to reach 71.20% whlile the yields on the 10 year (10Y)  decreased by 42 basis points (bps)  to end the period at 55.40%.

In the US, the yields on 5 year and 10 yeald US treasuries, recorderd a decrease  from the week ending of 3 June 2021 from 0.84% and 1.63% to end of the of week of 10 June, 2021 to 0.73% and 1.45%, respectively. In fact,  high demand from investors have pulled yields lower this week. However, the CPI for May 2021 revealed that prices rose at an annual rise of 5% which made investors concerned about whether this rise could make the Fed taper its assets purchases or raise interest rates. In this context, the Fed has claimed that the pressure on prices is transitory as the economy recovers from the pandemic. Not to mention that investors are watching closely jobless claims as the latter are  falling as expected by economists.

As such, from the week of 03 June, 2021 to 10 June 2021, the 5Y spread between the yield on Lebanese Eurobonds and their US comparable went up from  6,936 bps to 7,047 bps. Meanwhile, the 10Y spread  went down from 5,419 bps to 5,395 bps by the same period.


Lebanon . .


Weekly Change of Lebanese Eurobonds Prices


Maturity Coupon in %10/06/202103/06/2021Change 10/06/202103/06/2021Change bps

 Source: BLOMInvest Bank

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