US inflation surpassing forecasts, reaching 3.1% by end of January 2024

15/02/202408/02/2024ChangeYear to Date
BLOM Bond Index (BBI)
Weighted Yield207.43%206.00%0.70%136.20%
Weighted Spread20,20220,0590.71%130.20%


15/02/202408/02/2024 Change
JP Morgan EMBI838.17838.060.01%
5Y LEB120.70%120.40%30
10Y LEB118.70%120.05%-135
5Y US4.22%4.12%10
10Y US4.24%4.15%9
5Y SPREAD                   11,648                     11,62820
10Y SPREAD                   11,446                     11,590-144

The Lebanese government has officially rolled out its National Social Protection Strategy, a pivotal moment in Lebanon’s ongoing recovery endeavors and an initial stride towards holistic social restructuring. This strategy stems from extensive endeavors launched in 2019 by Lebanon’s Inter-Ministerial Committee on Social Policy, spearheaded by the Ministry of Social Affairs, with financial backing from the European Union and the Government of the Netherlands, along with technical guidance from the ILO and UNICEF.

In his address, Prime Minister Najib Mikati praised the collaborative efforts of international organizations in Lebanon, alongside the Ministry of Social Affairs and various official Lebanese entities, stating that given Lebanon’s current political, security, and economic challenges, discussing a social protection strategy may seem impractical initially. However, these adversities compel us to devise extraordinary measures to safeguard marginalized social segments, uphold the middle class, which serves as the societal equilibrium, and generate employment opportunities for a larger number of people, thereby helping the state in reducing the burden of social protection.

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), rose throughout the course of this week, by 1.01% to stand at 5.22 points by February 15, 2024. As for the JP Morgan EMBI, it slightly increased by 0.01% to stand at 838.17 by the week of February 15, 2023 compared to 838.06 in the previous week.

Furthermore, the yield on the five years (5Y) Lebanese Eurobonds increased by 30 bps to stand at 120.7%. Meanwhile, the yield on the ten years (10Y) Lebanese Eurobonds decreased by 135 bps to stand at 118.7% by the week ending February 15, 2024 compared to the previous week.

US yield curve shifted higher over the course of the week as one, five and ten years yields increased respectively by 10, 10 and 9 bps to stand at 4.93%, 4.22% and 4.24% by February 15, 2024 compared to the previous week.

In January 2024, new data revealed that US inflation surpassed forecasts, reaching 3.1% compared to the anticipated 2.7%. This unexpected surge in the consumer price index suggests that the Federal Reserve’s battle against inflation may not be over. Atlanta Federal Reserve Bank President Raphael Bostic emphasized that there’s no urgency to decrease interest rates, citing the strength of the US labor market and economy. He also cautioned that it’s uncertain whether inflation will consistently approach the central bank’s 2% target. Meanwhile, Chair Jerome Powell echoed this sentiment, stating that the Fed requires more assurance regarding inflation’s trajectory.

Indeed, market participants initially anticipated interest rate cuts starting in June, but recent consumer price index data led to a reassessment, reducing expectations for rate cuts this year.

As per Labor Department data, US jobless claims decreased by 8,000 to stand at 212,000 by the end of week of February 10th, despite recent rise in layoff from major corporations. Meanwhile, continuing claims – which measure the number of individuals who are filing for unemployment benefits for consecutive weeks- rose to 1,895,000, indicating ongoing challenges in the labor market’s recovery. This data underscores the importance of sustained efforts to bolster job creation and economic stability in the presence of inflationary pressures.

In turn, the 5Y spread between the yield on Lebanese Eurobonds and their US comparable recorded an upturn from 11,628 bps to 11,648 bps. Meanwhile, the 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a downturn from 11,590 to 11,446 bps by the week ending February 15, 2024.

5Y Credit Default Swaps (CDS)
 Source: Bloomberg


Weekly Change of Lebanese Eurobonds Prices 

MaturityCoupon in %15/02/202408/02/2024Change15/02/202408/02/2024Change bps

Source: BLOMInvest Bank

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