Higher Demand for Eurobonds and Long-term US Treasuries

Demand for Lebanese Eurobonds showed a minor improvement as the BLOM Bond Index (BBI) ticked up by 0.16% over the week to 107.24 points. Lebanon’s BBI still managed to outperform the JP Morgan Emerging Markets’ Bond Index which slightly increased by a weekly 0.02% to settle at 674.85 points.

The yields on the Lebanese Eurobonds maturing in 5Y and 10Y lost 3 basis points (bps) and 2 bps to 5.16% and 6.06%, respectively. In the U.S, the yield on 5Y treasuries added 2 bps to 1.65%, while that of the 10Y dropped 8 bps to 2.28%. The increase in demand for long term US notes came as a result of low inflation expectations, driven by falling commodity prices. Accordingly the spread between the yields on the 5Y Lebanese Eurobonds and their US comparable narrowed by 5 bps to 351 bps, while the spread between yields on 10Y notes widened from 372 bps to 378 bps.

Lebanon 5Y Credit Default Swaps (CDS) steadied at 355-380 bps. 5Y CDS quotes of Saudi Arabia, Turkey and Brazil widened from 219-222 bps, 55-60 bps, and 260-263 bps to 225-228 bps, 57-62 bps, and 290-293 bps, respectively. As for Dubai’s 5Y CDS quotes, they narrowed from last week’s 179-188 bps to 175-180 bps.

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