|17/11/2022||10/11/2022|| Change||Year to Date|
|BLOM Bond Index (BBI)||6.17||6.22||-0.80%||-43.70%|
|Weighted Yield ||160.73%||158.92%||1.14%||83.02%|
|JP Morgan EMBI||749.55||736.85||1.72%|
|5Y SPREAD|| 13,307|| 13,105||202|
|10Y SPREAD|| 11,123|| 11,068||55|
The Eurobonds performance showed signs of deterioration this week. In fact, Lebanon is in the midst of economic, social and political crises and requires all of its institutions (presidency, government and parliament) in order to pave the way for a sustainable recovery plan. Unfortunately, three weeks after the end of Term of Michel Aoun’s presidency, there is still no consensus or compromise regarding the head of state election.
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), recorded a drop of 0.8% weekly and remarkable fall YTD of 43.7% to stand at 6.17 points by the week ending November 17, 2022 compared to the week of November 10, 2022. As for the JP Morgan EMBI, it rose by 1.72% to stand at 749.55 by the end the week of November 17, 2022, compared to 736.85 by the end of the week of November 10, 2022.
Furthermore, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds registered respectively a growth by 200 and 50 basis points (bps) to stand at 137% and 115%, by the week ending November 17, 2022 compared to the week of November 10, 2022.
In the U.S market this week, six months and one-year yields reached the highest values of 4.57 and 4.68 respectively. In fact, one-year yield exceeds 10-year yield by 91 basis points. The US treasury yield curve reached new extremes of inversion on Thursday, November 17th as the likelihood of an upcoming recession is very possible.
As US inflation reached a lower figure than forecasted of 7.7% last week, policymakers reflect that there is still a long way to go in order to reach the 2% medium target. Nevertheless, the challenge is that monetary policy operates with a lag; consequently, if the Fed raises interest rates in December, the US market won’t feel the full effects until around a year later.
US Jobless claims fell by 3000 over the week to reach 222k, and remained near historic lows, showcasing the strength of the labor market as other parts of the economy cool. Despite the Federal Reserve’s aggressive efforts to slow down the economy to tame decades-high inflation, employers are still hiring at a solid pace. The US added more jobs than forecasted last month and there are still almost two open positions for every American seeking work. Moreover, economists announced that the recent wave of layoffs at high-profile companies such as Amazon, twitter and Meta aren’t indicative of the health of the overall labor market. In fact, industries including manufacturing and leisure and hospitality are still struggling to fill open positions post Covid-19 pandemic.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a growth from 13,105 and 11,068 bps to 13,307 and 11,123 bps respectively by the week ending November 17th, 2022.
|5Y Credit Default Swaps (CDS)|
|Lebanon|| .|| .|
| Source: Bloomberg|
Weekly Change of Lebanese Eurobonds Prices
|Maturity ||Coupon in %||17/11/2022||10/11/2022||Change ||17/11/2022||10/11/2022||Change bps|
Source: BLOMInvest Bank