Fitch affirmed Lebanon’s rating as “RD” and has withdrawn Lebanon’s ratings

This week, Fitch has affirmed Lebanon’s rating as ‘Restricted Default’ (RD) and has withdrawn Lebanon’s ratings as Fitch no longer has sufficient information to maintain the ratings due to the unavailability of certain key data. Accordingly, Fitch will no longer provide ratings or analytical coverage for Lebanon.

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 throughout the course of the week by 0.98%, to reach 6.31 points by July 25, 2024. Meanwhile, JP Morgan EMBI fell by 0.21% to stand at 873.86 points on July 25, 2024 compared to 875.71 points on July 18, 2024.

The yield on the five-year (5Y) and ten year (10Y) Lebanese Eurobonds dropped respectively by 70 bps and 80 bps to stand at 105.1% and 101.25% by the week ending July 25, 2024 compared to the previous week.

US yield curve remained shifted higher over the course of the week as five and ten years’ yields rose by 2 and 7 bps to stand at 4.13% and 4.27% respectively on July 25, 2024 compared to the previous week.

The US economy grew faster than expected in the second quarter of the year at 2.8% rate, fueled by consumer and business spending. Therefore the data highlights the resilience of American consumers and businesses despite continued high interest rates.

Nonetheless, Americans are still feeling squeezed by an elevated inflation and by higher interest rates. Consumers are still spending but they’re dialing back, and that’s being seen in company earnings reports. At the same time, credit card delinquencies reached a new high, according to the Federal Reserve Bank of Philadelphia. The silver lining is that a slowing — not crashing — economy is what the Federal Reserve wants to see as it tries to tame inflation. That would be the elusive soft landing.

US Jobless claims for the week ending July 20 fell by 10,000 to 235,000 from 245,000 the previous week, as per the Labor Department. It’s the ninth straight week claims came in above 220,000. The total number of Americans collecting unemployment benefits fell for the second time in three weeks. About 1.85 million Americans were collecting jobless benefits for the week of July 13, around 9,000 fewer than the previous week. However, the four-week average for continuing claims rose to 1,853,500, the highest level since December of 2021.Continuing claims have been on the rise in recent months, suggesting that some Americans receiving unemployment benefits are finding it more challenging to land jobs. While the labor market remains historically healthy, recent government data suggest some weakening as the unemployment rate ticked up to 4.1% in June.

Economists don’t expect Fed officials to cut interest rates in their next meeting on July 30- 31, but a continued moderation in inflation would bolster the case to cut rates starting September, two months before the election.

Voters typically blame the president and their party when they’re sour on the economy, and that was a major issue for President Joe Biden before he announced he wouldn’t seek a second term. Now it’s Harris’ problem. Both she and Trump will try to convince voters that their policies will strengthen the economy and their personal finances.

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a downturn from 10,169 and 9,785 bps to 10,097 and 9,698 bps respectively by the week ending July 25, 2024 compared to the previous week.

Weekly Change of Lebanese Eurobonds Prices 

Source: BLOMInvest Bank

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