The BLOM Bond Index (BBI) saw a minor improvement of 0.14% over the past week to 106.687 points. The JP Morgan emerging markets’ bond index outperformed the BBI as it gained a weekly 2.25% to reach 674.87 points.
The yields on the 5Y and 10Y Lebanese notes respectively dropped from 5.37% and 6.17% last week to 5.34% and 6.15% this week. In the US, the yield on the 5 Year US benchmark note slightly slid from 1.48% last week to 1.47% this week while the yield on the 10 Year note rose from 1.98% to 2.01%.
In the previous week, yields on US treasuries dropped after the Federal Reserve stated it would increase rates later than expected and after it cut growth and inflation forecasts. This past week, yields partly recovered from that drop after a sluggish demand was registered at auctions for both 5 Year and 7 Year notes. The bid-to-cover ratio reached its lowest since May 2009.
Accordingly, the spread between the yield on the 5Y Lebanese Eurobonds and their US comparable narrowed from 389 basis points (bps) to 387 bps. The 10 Year spread also narrowed from 419 bps to 414 bps.
Lebanese 5Y Credit Default Swaps (CDS) widened from last week’s quote of 370-390 bps to 380-399 bps. In regional economies, 5 year CDS quotes of Saudi Arabia widened from 69-76 bps to 75-85 bps, perhaps on account of Saudi Arabia’s military intervention in Yemen. Turkey’s 5 Year CDS also widened from 207-210 bps to 217-222 bps. The 5 year CDS for Dubai narrowed from last week’s quote of 201-213 bps to 193-202 bps as did the 5 year CDS for Brazil going from 303-308 bps to 289-293 bps.