The BLOM Bond Index (BBI) which is BLOMInvest Bank’s market value-weighted index tracking the performance of the Lebanese government Eurobond’s market (excluding coupon payments), slightly decreased throughout the course of the week by 0.78%, to reach 6.34 points by June 13^th, 2024. However, JP Morgan EMBI rose by 0.48% to stand at 867.9 on June 13^th, 2024 compared to 863.74 on June 6^th, 2024.

The yield on the five-year (5Y) and ten year (10Y) Lebanese Eurobonds rose respectively by 85 bps and 75 bps to stand at 103.85% and 100.75% by the week ending June 13^th, 2024 compared to the previous week.

US yield curve shifted lower over the course of the week as one, five, and ten years (10Y) yields dropped respectively by 1 bps, 5 bps and 4 bps to stand at 5.07%, 4.24% and 4.24% on June 13^th, 2024 compared to the previous week.

As per U.S. Bureau of Labor Statistics, the US annual inflation rate unpredictably eased to 3.3% in May 2024 compared to 3.4% in April 2024 and lower than the forecasted rate of 3.4%. Inflation for food, shelter, and transportation declined while that of energy increased.

Meanwhile, core inflation eased to 3.4% annually in May 2024, the lowest since April 2021, and below the forecast of 3.5% annually. In line with forecasts, the Federal Reserve kept the rates at 5.25% – 5.5% for the 7^th consecutive meeting in June 2024. Policymakers still prefer to keep interest rates high until they have greater confidence that inflation is moving sustainably toward the target of 2% annually. As such, policymakers are seeing one rate cut in 2024 and four rate cuts in 2025 compared to March’s plan of three rate reductions in 2024 and other three in 2025.

This week’s data from US Department of Labor showed discouraging figures. Initial jobless claims increased by 13,000 and recorded the highest reading since August 2023 to stand at 242k for the week ending June 8^th (above the consensus forecast of 225k). This indicates the softening of the US labor market; therefore the Federal Reserve have to consider multiple rate cuts this year should the inflation rate progress towards the target rate of 2% annually.

Moreover, continuing claims rose by 30,000 to reach 1.82 million for the week ending June 1^st, the highest in nearly 5 months, revealing that Americans are struggling to find jobs.

Furthermore, the four-week moving average for initial jobless claims that dismiss week-to-week volatility increased by 4,750 to record 227k on the week ending June 8^th, 2024.

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded respectively an upturn from 9,871 bps and 9,572 bps to 9,961 bps and 9,651 bps by the week ending June 13^th, 2024 compared to the previous week.

Weekly Change of Lebanese Eurobonds Prices 

Source: BLOMInvest Bank

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