Lower Demand for Lebanese Eurobonds and for US Treasuries

Demand for Lebanese Eurobonds slid over the past week as shown by the 0.11% decrease in the BLOM Bond Index (BBI) to 107.08 points. However, Lebanon’s BBI still managed to outperform the JP Morgan Emerging Markets’ Bond Index which shed a weekly 0.13% to settle at 674.73 points.

The yields on the Lebanese Eurobonds maturing in 5 Years and 10 Years rose slightly from last week’s 5.18% and 6.06% to 5.19% and 6.08%, respectively. As for yields on the 5 Year and 10 Year US Treasuries they increased from last week’s 1.58% and 2.32% to 1.63% and 2.36%, respectively. The higher yields point to a lower demand for the safe-haven US treasuries as the Federal Reserve Chair Janet Yellen stated that if the economy meets the Federal Reserve’s expectations, a hike in interest rates later this year is still on the agenda. Accordingly the spread between the yields on the 5Y and 10Y Lebanese Eurobonds and their US comparable narrowed from 360 basis points (bps) and 374 bps last week to 356 bps and 372 bps this week.

Lebanon and Turkey’s 5 Year (5Y) Credit Default Swaps (CDS) steadied at 355-380 bps and 219-222 bps, respectively. Meanwhile, Brazil’s 5Y CDS narrowed from 263-266 bps to 260-263 bps as did Saudi Arabia’s CDS quotes from 57-65 bps to 55-60 bps. As for Dubai’s 5Y CDS quotes, they went from last week’s 174-194 bps to 179-188 bps.

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