US Market Witnesses a 52-year drop in Jobless Claims, Followed by a Likely Rise In CPI

 09/12/202102/12/2021 ChangeYear to Date
BLOM Bond Index (BBI)11.6311.64-0.09%-17.95%
Weighted Yield          83.58%83.35%0.28%0.72%
Weighted Spread             8,350              8,3290.25%0.87%

 09/12/202102/12/2021 Change
JP Morgan EMBI920.06913.200.75%
5Y LEB81.90%81.25%65
10Y LEB64.40%64.55%-15
5Y US1.26%1.21%5
10Y US1.49%1.44%5
5Y SPREAD                      8,064                        8,00460
10Y SPREAD                      6,291                        6,311-20

This week Lebanon witnessed a unionized public transport plan to observe a nationwide strike in Lebanon on December 9. Protests have also been called in Beirut at 06:00 and across Lebanon The protests are continuously taking place due to the government’s failure to uphold promises made previously to the public transport sector. Moreover, on December 9, Lebanese Central Bank had announced Circular 601, with a rate of 8,000 Lebanese pounds to the U.S. dollar for withdrawals from U.S. Dollar bank deposits, up from 3,900 of Circular 151. The new Decision is effective immediately and has a duration that ends on 30/6/2022.

In more details, 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), dropped by 0.09% to stand at 11.63 points by the week ending December 09, 2021 compared to the week of December 02, 2021. Meanwhile, the JP Morgan EMBI slightly increased from 913.20 to 920.06 during the period.

In addition, the yield on the 5 years (5Y) Lebanese Eurobonds jumped by 65 whereas the yield on 10 years (10Y) Lebanese Eurobonds dropped by 15 basis points (bps), respectively, to end the week of December 09 at 81.90% and 64.40%.

In the US, the yields on 5 year treasuries and 10 year US treasuries recorded a slight uptick from the week ending December 02, 2021 from 1.21% to 1.26% and 1.44% to 1.49% by the week ending December 09, respectively.

As for the US, week of December 4 witnessed a drop in jobless claims to 184,000 to reach a 52-year low as reported by the Labor Department on Thursday. A correction next week seems likely, but the trend in claims clearly is falling rapidly, reflecting the extreme tightness of the labor market and the rebound in GDP growth now underway,” as explained by Ian Shepherdson, chief economist at Pantheon Macroeconomics. “It’s very risky for firms to let go of staff unless they have no other choice, because re-hiring people later will be difficult and likely expensive.”

Moreover, US awaits the speeding up of the bond-buying program by the Fed, which is most likely to reduce its purchases by $30 billion. As such, rate hikes might be observed around May 2022.

It is worth noting that US markets will get a fresh look at the inflation picture when the Labor Department releases November’s consumer price index reading on Friday. The CPI is most likely to show growth of 6.7% year over year, which would be the highest level over the past 40 years.

In turn, the 5Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a jump from 8,004 bps to 8,064 bps, however, the 10Y spread recorded a downtick from 6,311 bps to 6,291 bps.

5Y Credit Default Swaps (CDS)
Lebanon . .
 Source: Bloomberg


Weekly Change of Lebanese Eurobonds Prices 

Maturity Coupon in %09/12/202102/12/2021Change 09/12/202102/12/2021Change bps


Source: BLOMInvest Bank

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