Demand for Emerging Bonds and US Treasuries Declined

04/09/201428/08/2014 ChangeYear to Date
BLOM Bond Index (BBI)*108.550108.5070.04%2.75%
Weighted Yield**5.09%5.09%07
Weighted Spread***345352-7-85


Lebanon’s Eurobonds market saw timid activity over the week with the BLOM Bond Index (BBI) stabilizing in 3 out of 5 sessions. The result was BBI inching up by a weekly 0.04% to hit an 18-Month high at 108.55 points, widening by 2.75% from the beginning of the year. Long term maturities revealed a slightly improving demand on the expense of medium term Eurobonds as reflected by the 1 basis point (bp) decrease in the 10Y yield to 6.12%, while the 5Y yield rose by 2 bps to 5.04%.

Emerging bonds lost their appeal this week following tensions between China and Philippines, the retreat in coal industry as well as the ongoing Ukrainian conflict. In this context, the JP Morgan emerging countries’ bond index lost 0.27% over the week to 688.85 points.

U.S. Treasuries saw declining demand during the week as prospects of improving economic indicators in the U.S pushed investors away of the safest assets market. 5Y and 10Y treasury yields climbed to 1.71% and 2.45%, up by 8 bps and 11 bps from last week’s levels. As a result, the 5Y and 10Y spreads between the Lebanese Eurobonds and their U.S benchmark narrowed by 6 bps and 12 bps to 333 bps and 367 bps, respectively.

Lebanon’s credit default swap for 5 years (CDS) tightened from last week’s quote of 340-370 bps, to 330-360 bps. In regional economies, 5Y CDS quotes of Saudi Arabia narrowed by 2 bps to 48-53 bps. Dubai 5Y CDS contracted from 159-169 bps to 151-161 bps. Similarly, the 5Y CDS of Brazil tightened by 9 bps to 129-131 bps. Meanwhile, Turkey’s 5Y CDS barely changed from 181-183 bps to 180-183 bps.

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