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 0.32%, to reach 6.36 points by May 30^th, 2024. Meanwhile, JP Morgan EMBI dropped by 0.26% to stand at 857.30 on May 30^th, 2024 compared to 859.51 on May 23^rd, 2024.

It is to be noted that BBI increased notably by 8.53% since May 9^th, 2024 from 5.86 to reach 6.36 on May 30^th, 2024 (with an increase of 4.44% between May 9^th, 2024 and May 10^th, 2024 from 5.86 to 6.12). The increase in BBI has led to a couple of speculations. First, some foreign investment funds that already own Lebanese Eurobonds totaling around $17 Billion (such as Ashmore and BlackRock to name a few) might be buying more Eurobonds in order to increase its shares and then raising a lawsuit against the Lebanese Republic. As Mr. Camille Abu Sulieman (ex-Minister of Labor and the eminent corporate lawyer) argued, Eurobond holders have till March 2025 to raise a lawsuit against the Lebanese Republic in New York City in order not to lose access to their interest payments under the stipulations of the Eurobond issues. Second, sources of Lebanese Prime Minister Najib Mikati stated that the caretaker government is considering repurchasing the Eurobonds bought by foreign investment funds at a discount. In such action, not only that it mitigate the risk of foreign investment funds raise a lawsuit against the Lebanese Republic, but it decreases the losses of the Central Bank and Lebanese commercial banks that currently hold $5 Billion & $9 Billion respectively if the prices rise due to the increase in demand for these Eurobonds in addition to retiring part of the foreign debt at lower cost. But such operation is not straight forward, since foreign creditors might not have interest to sell their holding of Lebanese Eurobonds anticipating a capital gain if prices increase.

However, as per Mr. Adel Afiouni (ex-Minister of State for Information Technology and banking expert) the increase in bonds prices is global due to the decrease in the short and long-term yields in most countries following the decrease in inflation in the United States and Euro zone.

Moreover, the yield on the five-year (5Y) Lebanese Eurobonds slightly increased by 5 bps to stand at 103.55% while ten year (10Y) Lebanese Eurobonds fell by 50 bps to stand at 100.45% by the week ending May 30^th, 2024 compared to the previous week.

US yield curve shifted higher over the course of the week as five and ten years (10Y) yields rose respectively by 5 and 8 bps on May 30^th compared to the previous week. Also, initial jobless claims increased by 3,000 to reach 219,000 in the week ending May 25^th after a drop in the prior week and were above the market anticipation of 218,000. Similarly, continuing claims, a proxy for the number of people receiving unemployment benefits, rose by 4,000 and reached 1.791 million in the week ending May 18^th, and the highest in 6 weeks, to reflect growing difficulty for job seekers to land a job. In addition, US four-week moving average for initial jobless claims that dismiss week-to-week volatility increased by 2,500 to reach 222,500.

In turn, the 5Y spread between the yield on Lebanese Eurobonds and their US comparable remained unchanged at 9,898 while the 10Y spread recorded a downturn from 9,648 bps by the week ending May 23^rd, 2024 to 9,590 bps by the week ending May 30^th, 2024.

Weekly Change of Lebanese Eurobonds Prices 

Source: BLOMInvest Bank

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