US jobless claims see largest decline since September

23/05/202416/05/2024ChangeYear to Date
BLOM Bond Index (BBI)6.346.320.38%5.14%
Weighted Yield231.49%226.72%2.10%163.60%
Weighted Spread22,60422,1282.15%157.57%
JP Morgan EMBI859.51865.92-0.74%
5Y LEB103.50%103.65%-15
10Y LEB100.95%101.00%-5
5Y US4.52%4.40%12
10Y US4.47%4.38%9
5Y SPREAD9,8989,925-27
10Y SPREAD9,6489,662-14

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 0.38%, to reach 6.34 points by May 24th, 2024. Meanwhile, JP Morgan EMBI dropped by 0.74% to stand at 859.51 on May 24, 2024 compared to 865.92 on May 16th, 2024.

Moreover, the yield on the five-year (5Y) and ten year (10Y) Lebanese Eurobonds fell respectively by 15 and 5 bps to stand at 103.5% and 100.95% by the week ending May 24th, 2024 compared to the previous week.

US yield curve shifted higher over the course of the week as one, five and ten years (10Y) yields rose respectively by 7, 12 and 9 bps on May 24th compared to the previous week.

Initial jobless claims decreased by 8,000 to reach 215,000 in the week ending May 18 after a similar drop in the prior week.  That was below the consensus of 220k and Bloomberg Economics’ estimate of 224k, marking the biggest decline since September, according to Labor Department data. Indeed, initial applications for US unemployment benefits fell as both demand for workers and layoffs ease. In fact, according to the latest Companies’ employment report, there are fewer mentions of layoffs and of labor shortages. Job cuts have slowed recently, and over the past six months unemployment claims have been oscillating within a fairly narrow range of historically low levels. Nonetheless, this suggests that labor-market cooling remains a slow process. On the other hand, continuing claims, a proxy for the number of people receiving unemployment benefits, were little changed at 1.79 million in the week ending May 11.

However, Federal Reserve officials are looking for further weakening in demand as they try to tame inflation without triggering a surge in unemployment. Moreover, Federal Reserve Bank of Atlanta President Raphael Bostic said monetary policy has been less effective in slowing growth than in previous cycles, reinforcing the need to keep rates higher for longer to curb inflation. Indeed, Bostic reiterated that people and businesses are less interest-rate sensitive after the pandemic. Nonetheless, Bostic indicated that it was a good sign that inflation resumed falling after making little headway in the January-to-March quarter, however the progress is still slow.

Bostic, who votes on monetary policy this year, reported on Tuesday that he thinks the central bank will be in a place to start lowering interest rates by the end of the year, though not likely before the fourth quarter. Similarly, Fed Governor Christopher Waller said Tuesday that he needs to see more evidence that inflation is taming before cutting interest-rates, adding that holding rates steady for another three or four months won’t tank the economy. Noting that the next FOMC meeting is on June 11 and 12.

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a downturn from 9,925 and 9,662 bps by the week ending May 16th to 9,898 and 9,648 bps respectively by the week ending May 24th, 2024.

5Y Credit Default Swaps (CDS)
 Source: Bloomberg




Weekly Change of Lebanese Eurobonds Prices 

Maturity Coupon in %23/05/202416/05/2024Change 23/05/202416/05/2024Change bps

Source: BLOMInvest Bank

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