This week, the Bonds market signaled a better performance reflecting some positivity in the atmosphere as Lebanon could be closer than ever to reach a preliminary deal with the IMF within this month as a further IMF discussions round started. This eased Eurobonds’ holder intentions regardless of the challenges that the Government would have to face to insure implementation of the reform and adjustments and on top the long delayed capital control law that is supposed to be reviewed and finalized this week. On a different note, PM Mikati has declared after his visit to the Doha Forum Last Saturday that Lebanon shall always preserve strong ties with all the Gulf countries and he discussed ties between the two sides with Qatari counterpart.
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 6.04% to stand at 12.22 points by the week ending March 31, 2022 compared to the week of March 24, 2022.
In addition, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds retreated by 240 and 30 basis points (bps), respectively, to end the week of March 31, 2022 at 77.20% and 61%.
In the US, the yields on 5-year treasuries recorded a slight increase from 2.37% to 2.42%, whereas the yields on 10-year US treasuries registered a downtick from 2.34% to 2.32% by the week ending March 31, 2022.
This week in the U.S, the US yields have risen by more modest points flattening the curve and registered an inversion that indicates that inflation is at an elevated level. Historically, the inversion increases the possibilities of pushing the economy into a recession and with the Federal Reserve’s position behind the curve, the US economy could be facing a strong risk of recession regardless of the latest Fed’s decisions. Maintaining economic growth would be a monumental task for the Central Banks all around the world.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a contraction from 7,723 bps and 5,896 to 7,478 bps and 5,868 bps, respectively.
| 5Y Credit Default Swaps (CDS) | ||
| 31/03/2022 | 24/03/2022 | |
| Lebanon | . | . |
| KSA | 51 | 49 |
| Dubai | 98 | 99 |
| Brazil | 209 | 218 |
| Turkey | 554 | 599 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 31/03/2022 | 24/03/2022 | Change | 31/03/2022 | 24/03/2022 | Change bps |
| 22/04/2024 | 6.65 | 11.78 | 11.20 | 5.18% | 166.79% | 170.19% | -340 |
| 04/11/2024 | 6.25 | 11.76 | 11.16 | 5.34% | 130.17% | 133.30% | -313 |
| 03/12/2024 | 7.00 | 11.56 | 11.09 | 4.22% | 130.93% | 133.35% | -242 |
| 26/02/2025 | 6.20 | 11.78 | 11.14 | 5.71% | 116.68% | 120.11% | -343 |
| 12/06/2025 | 6.25 | 11.90 | 11.50 | 3.51% | 106.22% | 107.90% | -168 |
| 28/11/2026 | 6.60 | 12.00 | 11.02 | 8.89% | 80.52% | 84.83% | -431 |
| 23/03/2027 | 6.85 | 11.71 | 11.14 | 5.16% | 80.16% | 82.84% | -268 |
| 29/11/2027 | 6.75 | 12.00 | 11.05 | 8.59% | 72.20% | 76.24% | -404 |
| 03/11/2028 | 6.65 | 11.76 | 11.04 | 6.53% | 67.39% | 70.42% | -303 |
| 26/02/2030 | 6.65 | 11.72 | 11.00 | 6.53% | 62.78% | 65.98% | -320 |
| 22/04/2031 | 7.00 | 11.55 | 11.03 | 4.72% | 63.62% | 66.08% | -246 |
| 23/03/2032 | 7.00 | 11.67 | 11.11 | 5.01% | 62.03% | 64.87% | -284 |
| 02/11/2035 | 7.05 | 11.79 | 11.06 | 6.56% | 59.82% | 63.52% | -371 |
| 23/03/2037 | 7.25 | 11.97 | 11.56 | 3.49% | 60.64% | 62.81% | -217 |
Source: BLOMInvest Bank