U.S Reduce Oil Reserves Amid Global Energy Crisis

No significant changes in Lebanon for this week other than the Lebanese pound sinking to a new low record on the black market. Not to mention the ongoing political deadlock of the newly formed government that had not successfully met since more than a month amid deteriorating diplomatic relations with Gulf countries. However, the Pope stated after PM Mikati visit this week that it is fundamental for Lebanon to maintain ideal relations with the Gulf countries while he added that the Vatican will ensure all the efforts in international forums to assist Lebanon overpassing its crisis and restoring peace and prosperity.

In more details, 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), plunged further by 3.36% to stand at 12.08 points by the week ending November 25, 2021 compared to the week of November 18, 2021. Meanwhile, the JP Morgan EMBI slightly decreased from 917.91 to 908.83 during the period.

In addition, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds jumped by 245 and 182 basis points (bps), respectively, to end the week of November 25 at 79.90% and 61.02%.

In the US, the yields on 5 year treasuries and 10 year US treasuries recorded a slight uptick from the week ending November 18, 2021 from 1.22% to 1.34% and 1.59% to 1.64% by the week ending November 25, respectively.

This week in the U.S market, GDP’s data revision revealed a growth for Q3 up by 0.1%. In turn, forecasts for last quarter indicate more substantial rebound than stated before. For instance, economic growth and employment rates seemingly would pick up at the end of the year.  However, the U.S. declared this week releasing oil from reserves to ease the skyrocketing gas prices. In this context, the Biden administration, in coordination with several countries such as India, China, Japan, Republic of Korea and the U.K, will tap the Strategic Petroleum Reserve (SPR) by releasing 50 million barrels of crude oil.  Nevertheless, OPEC claimed that such a move would worsen coming global oil surplus, especially amid the increasingly inflationary macro environment.

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a jump from 7,623 bps and 5,761 bps to 7,856 bps and 5,938 bps, respectively.

Weekly Change of Lebanese Eurobonds Prices 

Source: BLOMInvest Bank