U.S. 5-year Treasury Yield Slightly Increased This Week, Amid Signals of Possible Interest Rate Hikes

 27/01/202220/01/2022 ChangeYear to Date
BLOM Bond Index (BBI)11.1610.189.65%1.81%
Weighted Yield          87.94%93.38%-5.82%0.14%
Weighted Spread             8,751              9,305-5.95%-0.28%

 27/01/202220/01/2022 Change
JP Morgan EMBI892.93892.860.01%
5Y LEB84.00%89.00%-500
10Y LEB67.00%72.90%-590
5Y US1.66%1.62%4
10Y US1.81%1.83%-2
5Y SPREAD                      8,234                        8,738-504
10Y SPREAD                      6,519                        7,107-588

Lebanon witnessed a continuous improvement in its local currency; the Lebanese pound strengthened to around 22,500 end of week. In details, Lebanon’s government met on Monday regarding the proposed ‘budget’ for year 2022, expecting to mainly include higher taxes paid and spending at over 49 trillion Lebanese pounds aiming at regulating the economic crisis.

Moreover, politically, Saad Hariri’s announcement in a press conference in Beirut of not running in the coming parliament and his decision to suspend any role or responsibility in the political power, had shocked his supporters and the political team, adding that “there is no room for any positive opportunity for Lebanon in light of the Iranian influence”.

Furthermore, this week observed signing of the new agreement with Jordan and Syria which could be seen as a turning point for the energy sector. However, the World Bank is asking for a comprehensive reform plan of the electricity sector including loss reductions, improving bill collection and increasing electricity tariffs in order to determine the amount of financing needed.

Amid these developments, 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), rose by 9.65% to stand at 11.16 points by the week ending January 27, 2022 compared to the week of January 20, 2022. Meanwhile, the JP Morgan EMBI slightly increased from 892.86 to 892.93 during the period.

In addition, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds dropped by 500 and 590 basis points (bps), respectively, to end the week of January 27, 2022 at 84.00% and 67.00%.

In the US, the yields on 5-year treasuries recorded a slight uptick going from 1.62% to 1.66% and 10-year US treasuries dropped from 1.83% to 1.81% by the week ending January 27, 2022.

On Wednesday Jan 26th, Federal Reserve on Wednesday provided some hints that it could start raising interest rates as soon as March.

Fed Chairman Jerome Powell said asset purchases are also likely to halt in March, and the central bank released a paper outlining principles to start “significantly reducing” the bond holdings on its balance sheet without indicating a specific time frame.

Furthermore, jobless claims in the US were 260,000 for that week, a decrease of 30,000 from the previous week’s revised level, according to the labor department. Noting that a stronger labor market pushes for a higher target range for the federal funds rate by the central bank.

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a drop from 8,738 bps and 7,107 to 8,234 bps and 6,519 bps, respectively.

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


Weekly Change of Lebanese Eurobonds Prices 

Maturity Coupon in %27/01/202220/01/2022Change 27/01/202220/01/2022Change bps


Source: BLOMInvest Bank

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