This week in Lebanon, suppliers did not provide gas stations with fuel on Wednesday, as new price list will be announced by end of this week. In fact, fuel crisis hit Lebanon as subsidies are gradually lifted and it coincides with a worldwide spike in energy prices. In turn, Brent crude soared to its highest value since 2014, while gas prices in Europe surge by more than 250% since the start of the year. This worldwide hike in diesel prices would push electricity and heating bills up as winter is at the door.
Moreover, worldwide energy hike would raise concerns over Lebanese ability to afford power supply as EDL fails to provide Lebanese with their electricity need. However, worldwide energy shortages would be subject to OPEC’s decision concerning increasing their production preventing an energy crunch and covering the global high demand as economy recovers.
Given these disruptions, 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 1.62% to stand at 17.59 points by the week ending October 07, 2021 compared to the week of September 30, 2021. Meanwhile, the JP Morgan EMBI slightly decreased from 919.43 to 916.05 during the period.
In addition, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds dropped by 55 and 75 basis points (bps), respectively, to end the week of October 07 at 61.75% and 45.45%.
In the US, the yields on 5 year treasuries and 10 year US treasuries recorded a slight uptick from the week ending September 30, 2021 from 0.98% to 1.02% and 1.52% to 1.58% by the week ending October 07, respectively.
This week in the U.S. market, claims for unemployment fell to 326,000 while new open jobs stand at a new record high in July. In fact, the market is adapting to the new Covid situation though uncertainty remains for the economic outlook. Moreover, both the Fed and the ECB are deciding to taper the monthly amount of securities purchases which is becoming the main interest and concern for the investors. Additionally, inflation story is not complete yet. It was considered transitory as it was led by the high consumer demand amid post-Covid period recovery, whilst this scenario could change once disruptions to in energy supply remain on a positive trend and result in a hike to all consumers prices.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a downward move from 6,132 bps and 4,468 bps to 6,073 bps and 4,387 respectively.
|Lebanon|| .|| .|
| Source: Bloomberg|
Weekly Change of Lebanese Eurobonds Prices
|Maturity ||Coupon in %||07/10/2021||30/09/2021||Change ||07/10/2021||30/09/2021||Change bps|
Source: BLOMInvest Bank