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 0.55%, to reach 5.98 points by April 4, 2024. As for the JP Morgan EMBI, it declined by 0.22% to stand at 858.56 on April 4, 2024 compared to 860.41 on March 28, 2024.

Moreover, the yield on the five-year (5Y) Lebanese Eurobonds rose by 60 bps to stand at 108.3%, similarly the yield on the ten year (10Y) Lebanese Eurobonds increased by 125 bps to stand at 107.8% by the week ending April 4, 2024 compared to the previous week.

US yield curve shifted higher over the course of the week as five and ten years yields increased respectively by 9 and 11 bps to stand at 4.3% and 4.31% by April 4, 2024 compared to the previous week.

On Thursday, the Labor Department indicated an unexpected rise in first-time claims for U.S, mainly due to increasing layoffs. unemployment benefits for the week ending on March 30. The report states that the initial jobless claims rose to 221,000, marking an increase of 9,000 from 212,000, from the previous week. The government was responsible for the most layoff announcements in March. So far this year, technology has led cuts, followed by financial firms, services, and transportation.

Economists had projected a slight rise in jobless claims to 214,000, from the initial figure of 210,000 reported for the earlier week. With a larger than anticipated surge, jobless claims reached their peak since hitting a high of 225,000 in the week ending on January 27.

Furthermore, the report illustrated that continuing claims, which provide a reading on the number of individuals gaining continuous unemployment assistance, lowered by 19,000 to a total of 1.791 million for the week ending on March 23. The four-week moving average of continuing claims showed a minor decline to 1,799,750, which signifies a decrease of 750 from the revised average of 1,800,500 from the week before. Additionally, the Labor Department is set to release its anticipated monthly employment report for March on Friday. Economists predict that the unemployment rate is expected to remain steady at 3.9%.

Nancy Vanden Houten, Lead US Economist at Oxford Economics, stated that the claims data and other labor market indicators are consistent with a robust job market. As such, she reiterated that the Fed doesn’t require a significant weakening in the labor market to begin cutting interest rates but does need to be confident the job market is balanced enough to support slower wage growth. Based primarily on recent inflation data, she suggested a delay in the timing of the first rate cut from May to June in their forecast.

Additionally, Federal Reserve Chair Jerome Powell emphasized on Wednesday that the Fed has time to assess incoming data before reducing rates, signaling policymakers are willing to wait for more evidence of lower inflation to act. Indeed, inflation stood at 3.2% in February 2024 and Chair Jerome Powell  needs to see more progress that inflation is moving towards the Fed’s 2% target before lowering borrowing costs.

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded an upturn from 10,349 and 10,235 bps to 10,400 and 10,349 bps by the week ending April 4, 2024.

Weekly Change of Lebanese Eurobonds Prices 

Source: BLOMInvest Bank

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