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), slightly increased throughout the course of the week by 0.29%, to reach 5.79 points by April 25^th, 2024. As for the JP Morgan EMBI, it dropped by 0.27% to stand at 840.29 on April 25^th, 2024 compared to 842.55 on April 18^th, 2024.

Moreover, the yield on the five-year (5Y) and ten year (10Y) Lebanese Eurobonds fell respectively by 20 and 35 bps to stand at 111% and 109.9% by the week ending April 25^th, 2024 compared to the previous week.

US yield curve shifted higher over the course of the week as one, five and ten years yield increased respectively by 3, 2 and 6 bps on April 25 compared to the previous week.

On Thursday, the Commerce Department reported that gross domestic product expanded at a 1.6% seasonally. Additionally, data showed that, for the third straight month, inflation was proving stickier than expected after an immaculate cooling in the second half of last year. Indeed, US inflation stands at 3.5% by end of March 2024. This trend has led investors and Fed officials to rethink whether rate cuts will be appropriate this year. As a result, traders pared back expectations for the timing of a Fed rate reduction, fully pricing in the first cut in December. They now see only about 33 basis points of Fed rate reductions for all of 2024, well below the more than six quarter-point reductions they expected at the start of the year.

The Fed has been especially focused on monthly inflation readings in part because central bank economists have struggled to forecast inflation since the pandemic. Many failed to anticipate just how much it would rise in 2021 and 2022, and then they likewise were surprised by how quickly it appeared to fall last year despite solid hiring and spending.

US jobless claims for the week ending April 20 fell to 207k compared to 212k in the previous week, above Bloomberg forecast of 205k but short of the consensus estimate of 215k. The surprisingly low reading for initial jobless claims points to near-term resilience in the labor market, likely keeping the Fed on hold through the June FOMC meeting. Furthermore, continuing claims decreased modestly to 1,781k for the week ending April 13 (vs. a downwardly revised 1,796k prior). Continuing claims remain elevated relative to the 2019 average, but have largely stabilized since late last summer. Still, an elevated level of continuing claims indicates that workers find it more difficult to find full-time jobs. Economists now anticipate that the unemployment rate will increase to 3.9% (vs. 3.8% prior).

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded an upturn from 10,652 and 10,561 bps to 10,630 and 10,520 bps respectively by the week ending April 25th, 2024.

Weekly Change of Lebanese Eurobonds Prices 

Source: BLOMInvest Bank

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