Amid the efforts of the ambassadors of Saudi Arabia, Qatar, Egypt, France and United States, also known as Group of Five, the presidential election still far from being completed and there are rumors that the serious talks will start after holidays. Moreover, the recovery plan is still negotiated between the government and the parliament upon completing the fourth year of the default on the payment of Eurobonds this month and entering the fifth year. Furthermore, the war in Gaza and Southern border of Lebanon didn’t lessen after the failure of the cease fire talks in Gaza.

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), decreased throughout the course of the week by 1.12%, to reach 5.98 points by March 21, 2024. As for the JP Morgan EMBI, it improved by 0.88% to stand at 857.25 on March 21, 2024 compared to 849.73 on March 14, 2024.

Moreover, the yield on the five-year (5Y) Lebanese Eurobonds rose by 70 bps to stand at 107.9%, similarly the yield on the ten year (10Y) Lebanese Eurobonds increased by 195 bps to stand at 107.75% by the week ending March 21, 2024 compared to the previous week.

US yield curve shifted lower over the course of the week as one, five and ten years yields decreased respectively by 3, 3 and 2 bps to stand at 5.01%, 4.26% and 4.27% by March 21, 2024 compared to the previous week.

The Federal Reserve in his last meeting on Wednesday held the 23-year high interest rates at 5.5% as anticipated for the fifth consecutive meeting despite the expectation that there might be three rate cuts in 2024. The Federal Open Market Committee (FOMC) median anticipation that there might be a 75bps in interest rate cuts in 2024 but there is some cautious regarding the rate cuts given that policymakers in the US stated that it is unsuitable to start rates cuts before gaining more confidence that inflation is moving towards the target rate of 2% in a sustainable fashion.

Furthermore, US Jobless claims fell by 2,000 to reach 210,000 by the end of week of March 16, as per the US Department of Labor, and below the market expectation of 215,000. Concurrently, continuing unemployment claims were somewhat unchanged at 1,807,000 for the earlier week. This data in addition to the latest S&P Global US Manufacturing PMI preliminary estimates for March 2024 where it increased to a 21-month high of 52.5 reveals that the US labor market remains strong along with a solid monthly improvement in business activity at US private sector.

In turn, the 5Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a downturn from 10,291 to 10,289 bps. On the other hand, the 10Y spread between the yield on Lebanese Eurobonds and their US comparable increased from 10,151 bps to 10,333 by the week ending March 21, 2024.

Weekly Change of Lebanese Eurobonds Prices 

Source: BLOMInvest Bank

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