The Eurobonds performance showed signs of improvement this week despite continuous political deadlock over the presidential election. This week, Lebanon’s Central Bank has completed an audit of its gold reserves at the request of the IMF that found the amount of gold in its vaults was exactly identical to the amounts in its balance sheet. The situation in Lebanon is not finding a way for structural change; as a result the World Bank projected Lebanon’s economy to contract for the fifth year in a row due to lack of reforms to address the crisis.
In this context, 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 slight increase of 0.32% weekly but remarkable fall YTD of 43.52% to stand at 6.19 points by the week ending November 24, 2022. As for the JP Morgan EMBI, it rose by 0.80% to stand at 755.58 by the end the week of November 24, 2022, compared to 749.55 by the end of the week of November 17, 2022.
Furthermore, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds registered respectively a downtrend by 205 and 70 basis points (bps) to stand at 134.95% and 114.30%, by the week ending November 24, 2022 compared to the week of November 17, 2022.
In the U.S market this week, shorter yields rose while longer period yields dropped amid expectations that the Federal Reserves would slow interest rate hikes. In more details, the 1Y, 2Y, and 3Y registered an uptick of 0.07 bps, 0.03 bps, and 0.01 bps to stand at 4.75, 4.46, and 4.23, respectively. Meanwhile, the yields on the 5Y and 10Y US T-bills recorded a drop to reach 3.88 and 3.71, respectively, which is still signaling a recession on the horizon.
On the economic front, the national unemployment rate in the U.S rose to 3.7% over the month of October but was 0.9 percentage point lower than in October 2021. Overall, unemployment rates were higher in 24 States, lower in only one State, and stable in the other 25 States. Moreover, job openings and hires rates were little changes in September while the number of jobless claims increased to a 3-Month high to reach 240,000 by the week ending November 19, according to data released by the department of Labor. This was a remarkable increase mainly amid rising layoffs in the technology sector, from the previous weeks upwardly revised of 222,000 and surpassing economists’ expectations of 225,000.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a drop from 13,307 and 11,123 bps to 13,107 and 11,059 bps respectively by the week ending November 24, 2022.
|5Y Credit Default Swaps (CDS)|
|Lebanon|| .|| .|
| Source: Bloomberg|
Weekly Change of Lebanese Eurobonds Prices
|Maturity ||Coupon in %||24/11/2022||17/11/2022||Change ||24/11/2022||17/11/2022||Change bps|
Source: BLOMInvest Bank