Eurobonds Keep its Upward Trend; Lebanese Banks to File a Lawsuit Against the State

The BLOM Bond Index (BBI), which tracks Lebanese government Eurobonds (excluding coupon payments), rose by 2.94% this week to 19.534 points and remarkably by 46.99% since year start. The increase is attributed to persistence of political easing as the newly formed government agreed on Monday on the Ministerial Statement that provides the guidelines of the government’s function. The Ministerial statement was finalized and agreed upon within 10 days after the formation of the new government and for the first time it did not include any phrase that gives the right for any group to defend the country other than the state itself. Moreover, it included the urgent reforms needed to retain confidence of external parties.

It is to be noted that the Lebanese commercial banks are preparing to raise lawsuits against the Lebanese republic in order to preserve its rights and the rights of its clients who carry Eurobonds concerning the interest on the Eurobonds. This is due to the fact that under the stipulations of the Eurobonds issues, the creditors will lose their access to interest payments after five years of default, i.e. by March 2025.

In the U.S., yield curve shifted lower over the course of the week as one, five and ten years’ yields dropped by 7, 5 and 2 bps to stand at 4.2%, 4.34% and 4.5% respectively on February 20^th, 2025 compared to the previous week. The decrease in yield this week is attributed to several reasons. First, Trump’s plans to impose tariffs on imports from Canada and Mexico and on sectors such as automobiles, pharmaceutical and semi-conductors are still threats. Moreover, as per latest FOMC meeting, the Federal Reserve officials stated that they have to be cautious in interest rate cuts with 2.5% probability of reducing interest rates in March meeting as per CME Fed watch.

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a decline from 8,121 and 5,708 bps to 7,981 and 5,600 bps respectively by the week ending February 20^th, 2025 compared to prior week.

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