The advance in talks between political parties regarding the presidential vacancy, in addition to the army’s increased ability to control volatile regions in Lebanon, have led to decreased demand for Lebanese Eurobonds. The BLOM Bond Index (BBI) witnessed a 0.41% weekly downtick to 107.40 points as yields on long-term securities rose by 13 basis points (bps) to 6.15%. However, the persistent uncertainty in the region as a result of the death of Lebanese militiamen in an Israeli raid on Syria has driven down the yield on medium-term maturities by 2 bps to 5.12%.
In the U.S., investors’ appetite for Treasuries eroded in the face of the European Central Bank announcing its plans to implement a trillion-euro quantitative easing program. This led to the 5Y and 10Y yields rising 17 bps and 13 bps to reach 1.39% and 1.90%, respectively. Correspondingly, the 5Y spread between the Lebanese Eurobonds and their U.S benchmark narrowed by 19 bps to 373 bps, while the 10Y spread steadied at 425 bps.
In emerging markets, renewed increases in Chinese manufacturing, in addition to the influence of European money printing, allowed Asian stocks to gain and caused the bond market to decline. Consequently, the JP Morgan Emerging Markets Index posted a 0.15% weekly slip to 659.19 points.
Lebanon’s credit default swaps for 5 years (CDS) was last trading on Friday at 368-397 bps, remaining practically similar to last week’s quote of 368-396 bps. In regional economies, the 5Y insurance premiums on sovereign debt in Saudi Arabia reflected similar stability, moving from a previous quote of 60-80 bps to a current quote of 59-79 bps. On the other hand, Dubai’s CDS quote dropped 18 bps to 216-236 bps. As for emerging economies, the CDS quote in Brazil dropped down from 208-213 bps to 196-200 bps, while that of Turkey edged up from 177-181 bps to 179-182 bps.