BBI Drops To Record Lows As No Solution in Sight

This week, the defaulted bonds issued by Lebanon have taken a beating and reached a record low. The prices of the 5Y and 10Y Eurobonds fell sharply by more than 9% within the last seven days, pushing Yields higher to overpass the 100%. The Eurobonds market is undergoing a bumpy road as significant reforms are likely to continue to be very difficult to implement and the Government has so far made little progress in meeting conditions of the staff-level agreement with the IMF.

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), followed a sharp decline of 19.71% YTD and 7.95% weekly to stand at only 8.80 points by the week ending June 09, 2022 compared to the week of June 02, 2022. As for the JP Morgan EMBI, it slightly retreated by 1.55% to stand at 775.96 by the end the week of June 09, 2022, compared to 788.14 at the end of the week of June 02, 2022.

Furthermore, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds registered a remarkable increase of 712 and 585 basis points (bps), respectively to end the week of June 09, 2022 at 101.17% and 82.05%.

In the US, the yields on 5-year and 10 year recorded a slight increase by 15 and 12 basis points to settle at 3.07% and 3.04%, respectively by the week ending June 09, 2022 . Treasury yields went up, sending bond prices lower and reflected investors’ assessments of the economy’s prospects. As the yields on the shorter-term T-bills fell below those on the long-term ones, investors projected a more pessimistic outlook and higher inflation expectations that could shape the Federal Reserve’s rate-hiking strategy.

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded an increase from 9,113 bps and 7,328 bps to 9,810 bps and 7,901 bps by the week ending June 09, 2022.

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


Weekly Change of Lebanese Eurobonds Prices 

Maturity Coupon in %09/06/202202/06/2022Change 09/06/202202/06/2022Change bps


Source: BLOMInvest Bank

Leave a Reply

Your email address will not be published. Required fields are marked *