This week in Lebanon, the Bonds market recorded positive upticks as a long awaited IMF deal was brought to light. The Lebanese authorities, with IMF staff support, have finally formulated a comprehensive economic reform program aiming to revive the country’s economy and restoring financial stability. However, the agreed Staff-Level agreement is subject to IMF management and the Executive Board approval as well as financing support would be on highly concessional terms as Lebanese Government had to undertake several critical reforms prior to IMF board approval. This development has surely eased the bonds market in Lebanon and pushed prices to rebound, awaiting the bumping road ahead for Lebanon.
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), added 6.28% YOY and 18.45% YTD to stand at 12.99 points by the week ending April 07, 2022 compared to the week of March 31, 2022.
In addition, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds retreated by 140 and 21 basis points (bps), respectively, to end the week of April 07, 2022 at 77.45% and 60.99%.
In the US, the yields on 5-year and 10 year US treasuries recorded a remarkable increase from 2.42% and 2.32% to 2.70% and 2.66% by the week ending April 07, 2022.
This week in the U.S, the yields rose further by more diffident points with also an inverted curve that indicated that yields on shorter term are higher than yields on longer term, opposite to the usual yield curve. In turn, investors are very cautious about immediate short term investments due to recent geopolitical tensions, high inflation and future fed monetary policy.
Moreover this week, the Federal Open Market Committee (FOMC) released the minutes of its meeting held on March 15-16, 2022 in which the board of Governors of the Fed system voted unanimously to raise the interest rate paid on reserve balances to 0.4% effective March 17, 2022. Furthermore, the Fed reached consensus that they would begin by next May in reducing the Central Bank balance sheet by about $95 billion a month.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a contraction from 7,643 bps and 5,888 to 7,475 bps and 5,833 bps, respectively.
| 5Y Credit Default Swaps (CDS) | ||
| 7/4/2022 | 3/31/2022 | |
| Lebanon | . | . |
| KSA | 51 | 51 |
| Dubai | 98 | 98 |
| Brazil | 212 | 209 |
| Turkey | 592 | 554 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 07/04/2022 | 31/03/2022 | Change | 07/04/2022 | 31/03/2022 | Change bps |
| 4/22/2024 | 6.65 | 12.67 | 11.78 | 7.53% | 160.81% | 166.79% | -598 |
| 11/4/2024 | 6.25 | 12.73 | 11.76 | 8.28% | 124.75% | 130.17% | -543 |
| 12/3/2024 | 7.00 | 12.50 | 11.56 | 8.14% | 125.48% | 130.93% | -545 |
| 2/26/2025 | 6.20 | 12.46 | 11.78 | 5.82% | 113.18% | 116.68% | -350 |
| 6/12/2025 | 6.25 | 12.98 | 11.90 | 9.04% | 101.14% | 106.22% | -508 |
| 11/28/2026 | 6.60 | 12.60 | 12.00 | 5.02% | 78.20% | 80.52% | -231 |
| 3/23/2027 | 6.85 | 12.33 | 11.71 | 5.28% | 77.52% | 80.16% | -264 |
| 11/29/2027 | 6.75 | 12.57 | 12.00 | 4.75% | 70.07% | 72.20% | -212 |
| 11/3/2028 | 6.65 | 12.38 | 11.76 | 5.28% | 65.05% | 67.39% | -234 |
| 2/26/2030 | 6.65 | 12.34 | 11.72 | 5.32% | 60.32% | 62.78% | -246 |
| 4/22/2031 | 7.00 | 12.32 | 11.55 | 6.69% | 60.31% | 63.62% | -331 |
| 3/23/2032 | 7.00 | 12.69 | 11.67 | 8.77% | 57.59% | 62.03% | -444 |
| 11/2/2035 | 7.05 | 12.60 | 11.79 | 6.90% | 56.17% | 59.82% | -365 |
| 3/23/2037 | 7.25 | 12.61 | 11.97 | 5.39% | 57.54% | 60.64% | -310 |
Source: BLOMInvest Bank