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)
09/06/202202/06/2022
Lebanon . .
KSA6364
Dubai123118
Brazil250229
Turkey812714
 Source: Bloomberg

 

Weekly Change of Lebanese Eurobonds Prices 

 PricesWeeklyYieldsWeekly
Maturity Coupon in %09/06/202202/06/2022Change 09/06/202202/06/2022Change bps
22/04/20246.658.599.33-8.01%224.05%210.99%1306
04/11/20246.258.508.86-4.04%170.53%165.37%516
03/12/20247.008.549.05-5.63%170.70%163.85%686
26/02/20256.208.489.33-9.12%150.40%141.31%909
12/06/20256.258.869.45-6.21%135.35%129.23%613
28/11/20266.608.489.38-9.55%104.38%97.63%675
23/03/20276.858.459.38-9.90%101.20%94.26%693
29/11/20276.758.469.38-9.81%94.50%87.79%671
03/11/20286.658.499.01-5.77%86.79%82.99%380
26/02/20306.658.529.02-5.59%81.29%77.51%378
22/04/20317.008.509.00-5.56%83.12%79.07%405
23/03/20327.008.509.19-7.53%82.00%76.37%563
02/11/20357.058.429.01-6.49%82.86%77.74%512
23/03/20377.258.429.33-9.80%84.61%76.62%799

 

Source: BLOMInvest Bank

Leave a Reply

Your email address will not be published.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