The Lebanese Eurobonds market witnessed a fall in demand this week, illustrated by the hikes all along the yield curve. Local disturbance coupled with heightened problems in Syria have held back the BLOM Bond Index (BBI), which dropped by a weekly 0.32% to 106.802 points. However, the Lebanese gauge outperformed the JP Morgan Emerging Markets’ Bond Index which lost a weekly 0.74% to 667 points.
The yield on the Lebanese Eurobonds maturing in 5Y and 10Y rose by 5 basis points (bps) and 8 bps to 5.40% and 6.29%, respectively over the week
Minutes of the Fed’s latest meeting left the door open whether interest rates hike may take place or not in September, partially due to less than promising inflation figures. Investor’s prospects following the meeting revealed lower probability of the rates’ hike taking place in the coming month, which might have pushed up demand for US treasuries over the past week. I
n fact, the yield on US 5Y and 10Y notes declined from last week’s 1.58% and 2.19% to 1.50% and 2.09%, respectively.
Consequently, the spread between the yields on the 5Y Lebanese Eurobonds and their US comparable broadened from 377 bps to 390 bps while the 10Y spread widened from 402 bps to 420 bps.
Lebanon’s 5Y Credit Default Swaps (CDS) broadened from last week’s 358-383 bps to 403-443 bps this week. This jump was possibly due to the country following the broadening CDS trend in the emerging markets in addition to the publishing of the fiscal results showing a deterioration of the fiscal deficit. The 5Y CDS quotes of Saudi Arabia also grew from 61-66 bps to 110-122 bps, Dubai’s 5Y CDS quote widened from 182-191 bps to 198-213 bps and Turkey’s 5Y CDS quotes grew from 257-260 bps to 276-280 bps. Moreover, Brazil’s 5Y CDS quotes broadened from 307-311 bps to 324-330 bps.