This week in Lebanon, the Eurobonds market recorded remarkable drops and traded near the 10 cents on the dollar after the elections due to the unpredictable political path. Bonds’ holders are today anticipating a longer period for their debt restructuring deal as the parliamentary election added more doubt about the country’s ability to impose reforms needed to unleash the crucial international aid. However, elections results are key for the macro outlook but any obstacles or delay from the polarized and fragmented parliament would likely prolonged the shape of the economic recovery and deal with the Eurobond holders.
Amid these disruptions, 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), plunged by 7.09% YTD to stand at 10.22 points by the week ending May 19, 2022 compared to the week of May 12, 2022. As for the JP Morgan EMBI, it slightly retreated by 0.43% to stand at 771.72 by the end the week of May 19, 2022, compared to 775.04 at the end of the week of May 12, 2022.
Furthermore, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds registered a remarkable jump of 345 and 390 basis points (bps), respectively, to end the week of May 19, 2022 at 89.40% and 71.10%.
In the US, the yields on 5-year recorded a slight rise from 2.81% to 2.84% by the week ending May 19, 2022 while the 10-year US treasuries occurred no major changes and maintained the same last week level of 2.84%.
The U.S economy has been well maintained and was able to overpass the pandemic that weighed on macro outlook. But, concerns about Russia’s war in Ukraine, soaring inflation, and supply chain disruptions, potential slowing growth and tightening monetary policy have all driven investors toward traditional safe haven assets. Moreover, the Fed would not hesitate to continue raising rates until inflation is controlled to a manageable level and ensure his goal of bringing it closer to the 2% target.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a growth from 8,314 bps and 6,436 to 8,656 bps and 6,826 bps, respectively.
| 5Y Credit Default Swaps (CDS) | ||
| 19/05/2022 | 12/05/2022 | |
| Lebanon | . | . |
| KSA | 68 | 67 |
| Dubai | 129 | 114 |
| Brazil | 246 | 245 |
| Turkey | 718 | 699 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 19/05/2022 | 12/05/2022 | Change | 19/05/2022 | 12/05/2022 | Change bps |
| 22/04/2024 | 6.65 | 9.75 | 10.50 | -7.18% | 201.87% | 191.00% | 1087 |
| 04/11/2024 | 6.25 | 9.66 | 10.59 | -8.76% | 155.21% | 145.90% | 931 |
| 03/12/2024 | 7.00 | 9.67 | 10.62 | -8.97% | 154.56% | 144.59% | 997 |
| 26/02/2025 | 6.20 | 10.12 | 10.86 | -6.77% | 133.06% | 126.80% | 626 |
| 12/06/2025 | 6.25 | 9.97 | 10.79 | -7.58% | 123.38% | 116.84% | 655 |
| 28/11/2026 | 6.60 | 9.72 | 10.55 | -7.91% | 94.75% | 89.41% | 534 |
| 23/03/2027 | 6.85 | 9.89 | 10.46 | -5.49% | 90.71% | 87.22% | 348 |
| 29/11/2027 | 6.75 | 9.63 | 10.59 | -9.06% | 85.70% | 79.94% | 576 |
| 03/11/2028 | 6.65 | 9.86 | 10.56 | -6.67% | 77.58% | 73.72% | 386 |
| 26/02/2030 | 6.65 | 9.95 | 10.43 | -4.59% | 71.56% | 68.91% | 265 |
| 22/04/2031 | 7.00 | 10.03 | 10.57 | -5.14% | 72.00% | 68.83% | 317 |
| 23/03/2032 | 7.00 | 9.94 | 10.55 | -5.78% | 71.25% | 67.59% | 366 |
| 02/11/2035 | 7.05 | 10.03 | 10.60 | -5.46% | 70.21% | 66.57% | 364 |
| 23/03/2037 | 7.25 | 10.08 | 11.50 | -12.39% | 71.20% | 62.66% | 855 |
Source: BLOMInvest Bank