June 2024 US Annual Inflation Rate Beats Forecasts and Records 3%

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), increased slightly throughout the course of the week by 0.69%, to reach 6.19 points by July 11^th, 2024. Similarly, JP Morgan EMBI rose by 1.44% to stand at 877.2 points on July 11^th, 2024 compared to 864.79 points on July 4^th, 2024.

The yield on the five-year (5Y) and ten year (10Y) Lebanese Eurobonds dropped respectively by 25 bps and 10 bps to stand at 106.8% and 103.5% by the week ending July 11^h, 2024 compared to the previous week.

US yield curve shifted downward over the course of the week as one, five, and ten years (10Y) yields dropped respectively by 13, 20, and 16 bps to stand at 4.91%, 4.13% and 4.2% on July 11^th, 2024 compared to the previous week.

On Tuesday July 9^th, 2024, Jerome Powel gave his testimony before the Senate Banking, Housing, and Urban Affairs Hearings to examine the Semiannual Monetary Policy Report to Congress at Capitol Hill. He stated that Central Bank officials still want more insurance that there is a progress in the decline in inflation to reach the 2% target rate, while on the meantime they are keeping a close eye on the job market.

U.S. Bureau of Labor Statistics revealed on Thursday July 11^th, 2024 the US annual inflation rate of June dropped for the third month and recorded 3% from 3.3% in May 2024 and below the forecasted of 3.1%, the lowest in a year since June 2023. In details, energy costs rose at a slower pace while that of shelter and transportation reduced.

US initial jobless claims, being the number of people claiming unemployment benefits fell by 17k from the prior week to reach 222k on the period ending July 6^th and below market forecasts of 236k, as revealed by U.S. Department of Labor.

According to US Department of Labor, continuing US jobless claims dropped indicating that people are not facing difficulties finding a job. In more details, continuing claims, a proxy of the number of people receiving benefits, decreased by 4k to record 1,852k on the week ending June 29^th.

The four-week moving average for initial jobless claims that dismiss week-to-week volatility dropped to record 233.5K in July 6^th, 2024.

The unexpected decline in US inflation rate provoked an increase in market-implied anticipations of two rate cuts by Federal reserves this year with a current probability exceeding 80% of interest rate cuts to begin in September compared to 70% before the data is revealed and the Federal Reserve Chairman Jerome Powell testimony on Tuesday.

In turn, the 5Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a downturn from 10,272 bps to 10,267 bps while 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded an upturn from 9,924 bps to 9,930 bps by the week ending July 11^th, 2024 compared to the previous week.

Weekly Change of Lebanese Eurobonds Prices 

Source: BLOMInvest Bank

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