Lebanon’s Eurobonds market continues to follow the international investor trend of hesitance in fixed income markets for the second week running. Accordingly, the BLOM Bond Index (BBI) dropped by a weekly 0.18% to 107.08 points. In addition, yields on the 5Y and 10Y Lebanese notes augmented by a weekly 2 basis points (bps) and 5 bps, to 5.20% and 6.08%, respectively. However, the BBI succeeded in outperforming the JP Morgan Emerging Markets’ Bond Index, which lost a weekly 1.18% to reach 671 points.
There are two factors that weighed heavily on international bond markets. First, investors ’cautiousness towards record low yields following the Quantitative Easing Policy by the ECB led to a sell off of European Sovereign Bonds. The second factor is related to the high probability that the Federal Reserve will hike interest rates this year. Consequently, the yields on the 5Y and 10Y benchmark US notes increased weekly by 9 bps and 8 bps to 1.74% and 2.39%, respectively. Accordingly, the spread between the yields on the 5Y and 10Y Lebanese bonds and their US counterpart tightened by 7 bps and 3 bps to 346 bps and 369 bps, respectively.
Lebanon’s 5Y Credit Default Swaps (CDS) barely moved during the week from 347-371 bps last week, to 343-371 bps on June 11th. In regional economies, 5 year CDS quotes of Dubai, Egypt and Brazil tightened from 191-204 bps, 333-335 bps and 242-245 in the previous week to 188-200 bps, 299-322 bps and 239-241 bps respectively. Meanwhile, Saudi Arabia’s 5 year CDS quotes maintained last week’s quotes of 59-66 bps.