BBI increased as Group of Five attempts to establish political stability in Lebanon

29/02/202422/02/2024 ChangeYear to Date
BLOM Bond Index (BBI)5.475.117.10%-9.22%
Weighted Yield          207.48%214.54%-3.29%136.26%
Weighted Spread            20,207            20,911-3.37%130.25%
29/02/202422/02/2024 Change
JP Morgan EMBI844.33838.340.71%
5Y LEB116.20%123.70%-750
10Y LEB115.10%122.40%-730
5Y US4.26%4.33%-7
10Y US4.25%4.33%-8
5Y SPREAD                   11,194                     11,937-743
10Y SPREAD                   11,085                     11,807-722

Ambassadors from the United States, France, Saudi Arabia, Egypt, Qatar, known as The Group of Five, are trying to help Lebanon in order to elect a new Head of State. Indeed, following the prolonged presidential vacancy after the end of term of Michel Aoun in October 2022, the quintet became involved in the Lebanese presidential issue. Since then, twelve parliamentary electoral sessions, the last of which was held in June 2023, have tried and failed to elect a new president. In this context, the international community is attempting to establish political stability in Lebanon through the reconstitution of power, including the election of a President of the Republic and the formation of a government.

As such, the BLOM Bond Index (BBI) which is BLOMInvest Bank’s market value-weighted index tracking the performance of the Lebanese government Eurobond’s market (excluding coupon payments), increased remarkably throughout the course of the week by 7.1%, to reach 5.47 points by February 29, 2024. As for the JP Morgan EMBI, it rose by 0.71% to stand at 844.33 on February 29, 2024 compared to 838.34 on February 22, 2024.

Moreover, the yield on the five-year (5Y) and ten-year (10Y) Lebanese Eurobonds dropped respectively by 750 and 730 bps to stand at 116.2% and 115.1% by the week ending February 29, 2024 compared to the previous week.

US yield curve shifted lower over the course of the week as five and ten years yields dropped respectively by 7 and 8 bps to stand at 4.26% and 4.25% by February 29, 2024 compared to the previous week.

Federal Reserve Bank of New York President John Williams reported that there is no need for officials to tighten policy further; on the contrary, he expects the central bank to cut rates later this year. Williams acknowledged that inflation has retreated from multi-decade highs, but he emphasized officials want to see inflation return to 2% and remain there on a sustained basis.

Other Fed officials, including Chair Jerome Powell, have made clear in recent weeks that they don’t see a need to rush rate cuts given the underlying resilience of the economy and labor market, and lingering risks to their inflation outlook. Indeed, they reiterated that the patient approach has been validated by recent data showing price pressures remain elevated.

US jobless claims in the week ending February 24 increased to 215k, up from 202k in the previous week. Additionally, continuing claims surged by 45k to stand at 1,905k for the week ending February 17. As a result, the insured unemployment rate – the number of people currently receiving unemployment insurance as a percentage of the labor force – increased to 1.3% from 1.2% prior. The slight rise in jobless claims is likely to continue, given recent layoff announcements and January’s increase in warnings’ notices, which could lead to effective layoffs in two to three months.

In turn, the 5Y & 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a downturn from 11,937 bps and 11,807 bps to 11,194 and 11,085 bps respectively by the week ending February 29, 2024.

5Y Credit Default Swaps (CDS)
 Source: Bloomberg





Weekly Change of Lebanese Eurobonds Prices 

Maturity Coupon in %29/02/202422/02/2024Change 29/02/202422/02/2024Change bps

Source: BLOMInvest Bank

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