In contradiction with developments in other parts of the world, Lebanon’s Eurobonds showed improvement during the week, with the BLOM Bond Index (BBI) increasing 0.07%, to settle at 108.22 points. The gauge posted a 2.44% year-to-date (y-t-d) increase. The bouncing back of the Eurobonds market can be attributed to a weekly downtick in the 5Y and 10Y yields of 2 basis points (bps) and 1 bp to reach a yield of 5.17% and 6.21%, respectively.
Early discussions between Russia and Ukraine for the trade of Russian natural gas and the clear victory of the Republican Party, an event that generally strengthens the U.S stock market, in the U.S midterm elections led to emerging markets witnessing a declining bond market, with the JP Morgan emerging countries’ bond index weekly performance demonstrating a weekly decline of 0.88% to 678.52 bps.
In the U.S, further strengthening of the dollar against other leading currencies after a Republican victory in the Senate caused a slide in treasuries. This sent the 5Y and 10Y U.S yields up by 9 bps and 7 bps to 1.67% and 2.39%, respectively. Correspondingly, the 5Y and 10Y spreads between the Lebanese Eurobonds and their U.S benchmark respectively narrowed by 9 bps and 8 bps to 350 bps and 382 bps.
Lebanon’s Credit Default Swaps for 5 years (CDS) narrowed to 347-377 bps, compared to last week’s quote of 354-384 bps. In regional economies, the 5Y CDS quote of Saudi Arabia widened from 59-64 bps to 60-66 bps, while that of Dubai narrowed from 170-180 bps to 167-177 bps. In emerging economies, Brazil’s 5Y CDS quote broadened from 148-150 bps to 168-170 bps. The 5Y CDS quote of Turkey also experienced an expansion, from 173-176 bps to 178-180 bps.