Lebanon is facing major economic and social challenges, as the Lebanese government might remove its subsidy for essential goods in the coming months.However, economy minister Raoul nehme indicated that the current form of the proposal is still a preliminary one that needs to be studied and debated more.Notably, the government does not have many choices after the announcement of the BDL’s governor Riad Salame that BDL can continue to subsidize essential goods for two more months only.
As a result, The BLOM Bond Index (BBI) which is BLOMInvest Bank’s market value-weighted index tracking the performance of the Lebanese government Eurobonds’ market (excluding coupon payments), dropped weekly by 1.80% to stand at 13.06 points by the week ending December 10, 2020. Meanwhile, the JP Morgan EMBI advanced from last week’s 921.53 to 922.53 points this week.
As such, the yields on the 5 year (5Y) and 10 year (10Y) Lebanese Eurobonds rose by 30 basis points (bps) and 93 basis points (bps) to end the week at 72.20%. and 52.83%, respectively.
In the US, the yields on 5 year (5Y) US treasuries, recorderd a weekly decrease from 0.40% to 0. 39%, while the 10 year yield remained stable this week at 0.92%.In fact, republican senate leaders rejected $908B aid package proposed by a bipartisan group of lawmakers. Further, the US labor sector continued to suffer this year as weekly jobless claims jumped to 853000, its highest point since Sept. 19 and up from 716,000 in the previous week, according to data released by the Labor Department Thursday.
As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables widenned from last week’s 7,150, bps and 5,098, bps to 7,181, bps and 5,191, bps, repectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 10/12/2020 | 03/12/2020 | |
| Lebanon | N/A | N/A |
| KSA | 65 | 67 |
| Dubai | 114 | 119 |
| Brazil | 155 | 154 |
| Turkey | 385 | 366 |
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 10/12/2020 | 03/12/2020 | Change | 10/12/2020 | 03/12/2020 | Change bps |
| 04/10/2022 | 6.10 | 14.11 | 14.39 | -1.90% | 166.59% | 162.60% | 399 |
| 27/01/2023 | 6.00 | 13.77 | 14.61 | -5.75% | 142.24% | 135.43% | 681 |
| 22/04/2024 | 6.65 | 13.97 | 14.06 | -0.64% | 93.67% | 92.89% | 78 |
| 04/11/2024 | 6.25 | 13.81 | 13.82 | -0.07% | 82.23% | 81.92% | 31 |
| 03/12/2024 | 7.00 | 13.75 | 13.99 | -1.72% | 84.74% | 83.55% | 118 |
| 26/02/2025 | 6.20 | 13.83 | 14.48 | -4.47% | 77.06% | 74.55% | 251 |
| 12/06/2025 | 6.25 | 14.23 | 14.26 | -0.20% | 72.55% | 72.16% | 38 |
| 28/11/2026 | 6.60 | 13.87 | 13.83 | 0.27% | 62.96% | 63.01% | -5 |
| 23/03/2027 | 6.85 | 13.56 | 13.83 | -1.95% | 63.15% | 62.19% | 96 |
| 29/11/2027 | 6.75 | 13.62 | 13.85 | -1.67% | 59.66% | 58.90% | 76 |
| 03/11/2028 | 6.65 | 13.52 | 13.79 | -1.93% | 56.24% | 55.39% | 85 |
| 26/02/2030 | 6.65 | 13.81 | 14.08 | -1.95% | 52.36% | 51.50% | 86 |
| 22/04/2031 | 7.00 | 13.52 | 13.86 | -2.51% | 53.93% | 52.77% | 116 |
| 23/03/2032 | 7.00 | 13.55 | 13.63 | -0.57% | 52.96% | 52.69% | 27 |
| 02/11/2035 | 7.05 | 13.75 | 14.31 | -3.91% | 51.38% | 49.48% | 190 |
| 23/03/2037 | 7.25 | 13.75 | 13.90 | -1.11% | 52.50% | 51.95% | 55 |
Source: BLOMInvest Bank