The Lebanese Eurobonds market registered further upticks for the second week on a row to jump over the 7 cents levels, the highest since end of June, 2022. Crucially, however, the index is still relatively in low levels as still no recovery plans in sight to deal with bondholders. Given the circumstances in the Lebanese situation, especially the lack of confidence, the bonds market would likely undergo further pressures due to a negative sentiment concerning investors’ anticipation for the recovery path. On the political side, discussions of maritime border between Israel and Lebanon are optimistic, as an agreement could be reached later this month.
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), recorded an uptick of 5.36% weekly to stand at 7.08 points by the week ending August 03, 2022 compared to the week of July 28, 2022. As for the JP Morgan EMBI, it slightly increased by 3.04% to stand at 788 by the end the week of August 03, 2022, compared to 764.74 at the end of the week of July 28, 2022.
Furthermore, the yield on the 5 years (5Y) and the 10 years (10Y) Lebanese Eurobonds registered a drop of 300 and 443 basis points (bps) to stand at 119.80% and 101.15%, respectively, by the week ending August 03, 2022.
In the U.S market this week, most Treasury yields soared remarkably driven by markets’ sentiments for another half percentage point rate hike from the Fed in September. In details, 5Y T-bills note jumped significantly to 2.86% same as the yield on the 10Y T-bills note that reached 2.73%. Meanwhile, the yields on the 1Y, 2Y and 3Y Treasury bonds climbed to 3.14%, 3.10%, and 3.04%, respectively by the end of this week, but remained relatively higher than longer yields.
The market mixed following released data of job openings which plunged in June to the lowest level since September 2021 while initial claims for unemployment stood at 260,000 for the last week. Data are near the highest since November and indicating that a historically tighter labor market is starting to slow. In fact, total of employment vacancies dropped to about 10.7 million through the last day of June, however despite this sharp decline, there were still 1.8 open jobs for available worker in the US market.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a decrease from 12,011 bps and 10,290 bps to 11,694 bps and 9,842 bps by the week ending August 03, 2022.
| 5Y Credit Default Swaps (CDS) | ||
| 03/08/2022 | 28/07/2022 | |
| Lebanon | . | . |
| KSA | 58 | 70 |
| Dubai | 132 | 127 |
| Brazil | 273 | 281 |
| Turkey | 736 | 855 |
| Source: Bloomberg | ||
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 03/08/2022 | 28/07/2022 | Change | 03/08/2022 | 28/07/2022 | Change bps |
| 22/04/2024 | 6.65 | 6.87 | 6.50 | 5.69% | 278.96% | 284.97% | -601 |
| 04/11/2024 | 6.25 | 6.86 | 6.50 | 5.60% | 204.14% | 209.08% | -494 |
| 03/12/2024 | 7.00 | 6.79 | 6.50 | 4.40% | 204.25% | 208.29% | -404 |
| 26/02/2025 | 6.20 | 6.81 | 6.50 | 4.69% | 181.69% | 185.17% | -348 |
| 12/06/2025 | 6.25 | 7.15 | 6.66 | 7.34% | 158.90% | 164.90% | -600 |
| 28/11/2026 | 6.60 | 6.83 | 6.50 | 5.19% | 121.39% | 125.27% | -389 |
| 23/03/2027 | 6.85 | 6.76 | 6.50 | 4.10% | 119.82% | 122.83% | -301 |
| 29/11/2027 | 6.75 | 6.81 | 6.50 | 4.77% | 110.58% | 114.34% | -376 |
| 03/11/2028 | 6.65 | 6.81 | 6.50 | 4.71% | 102.98% | 106.69% | -371 |
| 26/02/2030 | 6.65 | 6.87 | 6.50 | 5.79% | 98.76% | 103.54% | -479 |
| 22/04/2031 | 7.00 | 6.86 | 6.31 | 8.82% | 100.56% | 108.59% | -803 |
| 23/03/2032 | 7.00 | 6.81 | 6.49 | 4.82% | 101.16% | 105.59% | -443 |
| 02/11/2035 | 7.05 | 6.84 | 6.49 | 5.39% | 100.42% | 105.57% | -516 |
| 23/03/2037 | 7.25 | 6.77 | 6.35 | 6.65% | 104.63% | 111.13% | -649 |
Weekly Change of Lebanese Eurobonds Prices
Source: BLOMInvest Bank