The situation in Lebanon remains intricate following the recent conflicts between Hamas and Israel. Just before the truce took effect, armed conflicts escalated by the end of this week along the Lebanese borders with Palestine. As such, 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), deteriorated rapidly since the start of the conflict in Palestine and dropped further this week by 0.31% to stand at 5.79 points by November 23, 2023. As for the JP Morgan EMBI, it added 1.22% to stand at 800.63 by the week of November 23, 2023 compared to 790.98 in the previous week.
Furthermore, the yield on the five years (5Y) and ten years (10Y) Lebanese Eurobonds increased respectively by 110 and 15 bps to stand at 160.60% and 115.10%, by the week ending November 23, 2023 compared to the previous week.
As for the US market, US Treasury yields were broadly higher, especially shorter terms yields, on November 23, 2023 as markets reopen following the Thanksgiving break. In details, 1Y, 2Y, and 3Y yields increased respectively by 3, 6, and 3 bps throughout the week to stand at 5.26%, 4.89%, and 4.62% by the end of this week. Furthermore, the 5Y yields added 1 bps to reach 4.44% meanwhile the 10Y yields declined by 3 bps to 4.42% On November 23, 2023. These changes made the yield curve more inverted than before.
Expectations for Fed rate cuts in 2024 have diminished as recent data revealed a greater-than-expected decline in new claims for unemployment benefits among Americans last week. In more details, initial claims for state unemployment benefits dropped 24,000 to a 209,000 for the week ended November 18, 2023 while continuing claims declined 22,000 to 1.840 million. The drop has lifted claims to a three-month high. Despite robust job figures, the prevailing belief persists that the U.S. labor market is slowing due to high interest rates. The latest Fed minutes underscored a cautious approach, with all participants deeming it suitable to uphold the current rate setting. In addition, the US S&P Global PMI is due, with a slight deterioration expected in the services sector from 50.6 to 50.4 and in the Manufacturing sector from 50 to 49.8, according to Bloomberg.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded an upturn from 15,507 and 11,050 bps to 15,616 and 11,068 bps respectively by the week ending November 23, 2023.
| 5Y Credit Default Swaps (CDS) | ||
| 23/11/2023 | 16/11/2023 | |
| KSA | 53 | 55 |
| Dubai | 65 | 65 |
| Brazil | 149 | 157 |
| Turkey | 338 | 356 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 23/11/2023 | 16/11/2023 | Change | 23/11/2023 | 16/11/2023 | Change bps |
| 04/11/2024 | 6.25 | 5.94 | 5.95 | -0.20% | 741.26% | 719.36% | 2190 |
| 03/12/2024 | 7.00 | 5.88 | 5.94 | -0.88% | 656.42% | 626.35% | 3007 |
| 26/02/2025 | 6.20 | 5.92 | 5.93 | -0.25% | 454.27% | 444.16% | 1011 |
| 12/06/2025 | 6.25 | 6.03 | 6.07 | -0.68% | 344.34% | 335.99% | 835 |
| 28/11/2026 | 6.60 | 5.94 | 5.94 | -0.13% | 174.68% | 172.92% | 176 |
| 23/03/2027 | 6.85 | 5.93 | 5.97 | -0.69% | 160.58% | 159.48% | 110 |
| 29/11/2027 | 6.75 | 5.97 | 5.98 | -0.07% | 142.46% | 141.44% | 101 |
| 03/11/2028 | 6.65 | 5.95 | 5.98 | -0.62% | 126.19% | 125.77% | 41 |
| 26/02/2030 | 6.65 | 5.99 | 5.99 | 0.02% | 113.89% | 113.87% | 3 |
| 22/04/2031 | 7.00 | 5.95 | 5.99 | -0.70% | 117.49% | 117.09% | 40 |
| 23/03/2032 | 7.00 | 5.95 | 6.00 | -0.70% | 115.19% | 114.65% | 54 |
| 02/11/2035 | 7.05 | 5.95 | 6.00 | -0.73% | 116.95% | 116.57% | 38 |
| 23/03/2037 | 7.25 | 6.00 | 6.00 | 0.00% | 117.31% | 117.55% | -24 |
Source: BLOMInvest Bank