Bond Yields Rose on the back of Interest Rate Hike Expectation
Over the past 3 weeks, the BLOM Bond Index (BBI) gained 0.44% to reach 104.42 points. It was surpassed by the JP Morgan Emerging Markets’ Bond Index (EMBI) which rose by 0.99%, ending the week at 806.74 points.
The yields on the Lebanese Eurobonds maturing in 5Y and 10Y narrowed from 6.28% and 6.90% to 6.23% and 6.79%, respectively.
In the US, demand for safe haven assets contracted, especially on 10Y T-bills. As such, the yields on the 10 year T-bills increased from 2.01% to 2.20% this week, and yields on the 5Y T-bills slightly rose from 1.78% on Aug. 25th to 1.79% on September 14th. Demand for US treasuries droppeds as domestic consumer prices rose at their fastest pace in seven months, hence raising expectations that the Fed will increase interest rates for the third time, this year.
The 5 and 10 year (Y) spread between the Lebanese Eurobonds and their US comparable declined from 450 bps and 489 bps to 444 bps and 459 bps, respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 14/09/2017 | 24/08/2017 | |
| Lebanon | 432 | 430 |
| KSA | 83 | 91 |
| Dubai | 140 | 113 |
| Brazil | 182 | 197 |
| Turkey | 163 | 174 |
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 14/09/2017 | 24/08/2017 | Change | 14/09/2017 | 24/08/2017 | Change bps |
| 12/11/2018 | 5.15 | 100.7 | 100.63 | 0.07% | 4.52% | 4.61% | -9 |
| 23/04/2019 | 5.5 | 100.88 | 100.5 | 0.38% | 4.92% | 5.18% | -26 |
| 20/05/2019 | 6 | 101.7 | 101.3 | 0.39% | 4.93% | 5.20% | -27 |
| 28/11/2019 | 5.45 | 100.75 | 100.38 | 0.37% | 5.08% | 5.27% | -18 |
| 09/03/2020 | 6.375 | 102.25 | 102 | 0.25% | 5.40% | 5.52% | -12 |
| 14/04/2020 | 5.8 | 100.63 | 100.38 | 0.25% | 5.53% | 5.64% | -11 |
| 19/06/2020 | 6.15 | 101.25 | 101.13 | 0.12% | 5.65% | 5.71% | -6 |
| 12/04/2021 | 8.25 | 107.75 | 107 | 0.70% | 5.82% | 6.07% | -25 |
| 04/10/2022 | 6.1 | 99.38 | 99.13 | 0.25% | 6.24% | 6.30% | -6 |
| 27/01/2023 | 6 | 98.88 | 98.25 | 0.64% | 6.25% | 6.39% | -14 |
| 22/04/2024 | 6.65 | 101 | 100.25 | 0.75% | 6.46% | 6.60% | -14 |
| 04/11/2024 | 6.25 | 98.63 | 98 | 0.64% | 6.49% | 6.60% | -11 |
| 03/12/2024 | 7.00 | 102.75 | 102.25 | 0.49% | 6.51% | 6.60% | -9 |
| 26/02/2025 | 6.20 | 98 | 97.5 | 0.51% | 6.54% | 6.63% | -9 |
| 12/06/2025 | 6.25 | 97.88 | 97.5 | 0.39% | 6.60% | 6.66% | -6 |
| 28/11/2026 | 6.60 | 99.25 | 98.88 | 0.37% | 6.71% | 6.76% | -5 |
| 23/03/2027 | 6.85 | 100.5 | 99.88 | 0.62% | 6.78% | 6.87% | -9 |
| 29/11/2027 | 6.75 | 99.63 | 98.75 | 0.89% | 6.80% | 6.92% | -12 |
| 03/11/2028 | 6.65 | 98.13 | 97.25 | 0.90% | 6.89% | 7.01% | -12 |
| 26/02/2030 | 6.65 | 97.5 | 96.88 | 0.64% | 6.95% | 7.03% | -8 |
| 22/04/2031 | 7.00 | 99.38 | 99.38 | 0.00% | 7.07% | 7.07% | 0 |
| 23/03/2032 | 7.00 | 99 | 99 | 0.00% | 7.11% | 7.11% | 0 |
| 02/11/2035 | 7.05 | 98.13 | 97.75 | 0.39% | 7.24% | 7.27% | -4 |
| 23/03/2037 | 7.25 | 98.88 | 98.63 | 0.25% | 7.36% | 7.38% | -2 |
