Despite the positive sentiment stimulated by the local political dialogue, this week was characterized by a slow activity on the Eurobonds market, if not for the $2.2B new Eurobonds issuance on bonds maturing in 2025 and 2030 that slightly enhanced the market’s weekly performance. The BLOM Bond Index (BBI) posted a 0.02% uptick to 106.99 points, barely widening its year-to-date gain to 0.86%. However, the Lebanese gauge was outperformed by the JP Morgan emerging markets’ bond index that edged up by a weekly 0.61% to stand at 672.74 points. As for yields on the Lebanese Eurobonds, while the 5Y yield added 2 basis points (bps) to 5.27%, the 10Y yield edged down by 2 bps to 6.18%.
U.S. Treasuries saw improvement over the week as bond market activity reflected investor’s pessimism regarding an increase in interest rates in mid-2015. Thus, 5Y and 10Y yields on U.S notes and bonds slipped 4 bps and 8 bps to 1.54% and 2.03%, respectively. Accordingly, each of the 5Y and 10Y spreads between the Lebanese Eurobonds and their U.S benchmark widened by 6 bps to respective levels of 373 bps and 415 bps.
Lebanon’s credit default swaps for 5 years (CDS) steadied over the past week, recording 371-394 bps, compared to 31-393 bps for the previous week. Worth mentioning that the 5Y spread between the Lebanese Eurobonds and their U.S benchmark is comparing well with the 5Y Lebanese CDS. In regional economies, 5 year CDS quotes in Saudi Arabia and Dubai narrowed by an average of 16 bps and 3 bps to 71-79 bps and 198-212 bps. As for emerging markets, the 5Y insurance premiums against state-debt default in Turkey closed at 189-192 bps compared to 185-187 bps last week and closed at 254-258 bps in Brazil compared to 235-237 bps last week.