This week, Lebanon witnessed partial lift of subsidies on fuel and other goods as foreign currency reserve reached below the required level. Moreover, earlier today Caretaker Prime Minister Hassan Diab approved to finance fuel imports at LL 3,900 to the dollar, instead of the LL 1,500, following the proposal of the Ministry of Finance. This step guarantees that fuel will remain partially subsidized for a period of three months only, with significant challenges and price rises at the pumps.
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 2.80% to stand at 13.56 points by the week ending June 24, 2021 compared to the week of June 17, 2021. Meanwhile, the JP Morgan EMBI progressed from 922.89 to 924.05 during the period.
In addition, the yields on the 5 year (5Y) and 10 year (10Y) Lebanese Eurobonds increased by 160 basis points (bps) and 106 basis points (bps) to end the period at 74.00% and 56.78%, respectively.
In the US, the yields on 5 year stood at 0.90% same as last week and the yields on 10 year US treasuries recorderd a decrease from the week ending 17 June 2021 from 1.52% to 1.49% as end of week of 24 June, 2021.
Yet data show that 10-year U.S. Treasury yield will edge higher following the release of inflation data on friday morning. Moreover, Bank of America announced earlier today that U.S. inflation is higly probable to remain elevated for two to four years, noting that only a financial market crash would prevent central banks from tightening policy in the next six months.
As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable went up from the week of 17 June, 2021 from 7,150 bps and 5,420 bps to 7,310, bps and 5,529 bps, respectively.
| 5Y Credit Default Swaps (CDS) (in basis points) | ||
| 24/06/2021 | 17/06/2021 | |
| Lebanon | . | . |
| KSA | 55 | 57 |
| Dubai | 88 | 88 |
| Brazil | 160 | 165 |
| Turkey | 380 | 388 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 24/06/2021 | 17/06/2021 | Change | 24/06/2021 | 17/06/2021 | Change bps |
| 27/01/2023 | 6.00 | 13.01 | 13.50 | -3.66% | 205.25% | 197.02% | 823 |
| 22/04/2024 | 6.65 | 13.06 | 13.52 | -3.42% | 113.74% | 110.62% | 312 |
| 04/11/2024 | 6.25 | 12.98 | 13.50 | -3.84% | 96.52% | 93.75% | 277 |
| 03/12/2024 | 7.00 | 12.81 | 13.05 | -1.85% | 99.14% | 97.61% | 153 |
| 26/02/2025 | 6.20 | 13.23 | 13.37 | -1.05% | 88.32% | 87.33% | 99 |
| 12/06/2025 | 6.25 | 13.37 | 13.40 | -0.18% | 83.06% | 82.72% | 34 |
| 28/11/2026 | 6.60 | 13.00 | 13.55 | -4.02% | 69.47% | 67.45% | 201 |
| 23/03/2027 | 6.85 | 13.04 | 13.32 | -2.09% | 68.07% | 66.96% | 111 |
| 29/11/2027 | 6.75 | 12.96 | 13.29 | -2.45% | 64.18% | 62.99% | 118 |
| 03/11/2028 | 6.65 | 13.04 | 13.34 | -2.25% | 59.42% | 58.39% | 104 |
| 26/02/2030 | 6.65 | 13.03 | 13.50 | -3.47% | 55.89% | 54.30% | 159 |
| 22/04/2031 | 7.00 | 12.80 | 13.09 | -2.22% | 57.08% | 56.00% | 108 |
| 23/03/2032 | 7.00 | 13.04 | 13.56 | -3.79% | 55.18% | 53.33% | 185 |
| 02/11/2035 | 7.05 | 13.00 | 13.40 | -2.96% | 54.23% | 52.72% | 151 |
| 23/03/2037 | 7.25 | 14.10 | 14.28 | -1.23% | 51.27% | 50.66% | 61 |
Source: BLOMInvest Bank