Demand for Lebanese government Eurobonds Down this Week

The BLOM Bond Index (BBI), a market value-weighted index tracking the performance of the Lebanese government Eurobonds market excluding coupon payments, retreated by 2.57% to close the week on January 10 at 49.27 points. Meanwhile, the JP Morgan Emerging Markets’ Bond Index (EMBI) recorded a 0.14% weekly uptick ending the week at 884.43 points.

According to BLOMInvest Bank, the demand on the 5 year (5Y) and 10Y Lebanese Eurobonds dropped over the past week, as their respective yields rose from 37.50% and 21.90%, to 38.80% and 22.45%, respectively. As for the 5Y CDS,  it recorded a significant increase from 2,433  basis point by January 2, 2020  to 2,592  basis point by January 9, 2020. In fact, the rising uncertainty around a possible government formation and the current economic crisis have negatively affected the Lebanese Eurobond Market’s performance.

In the US, demand for treasuries added this week, owing to the  strong demand for the US 30-year bonds during Thursday’s debt auction. In details, yields on the 5Y and 10Y US treasuries fell by 2 and 3 basis points (bps) to 1.65% and 1.85%, respectively, by the week ending Jan. 10. Worth mentioning that the geopolitiocal tensions between US-Iran led to an important drop of the 5Y and 10Y US treasuries on Friday January 3, to reach 1.59% and 1.80%, respectively. In fact, investors were closely waiting for a response from Tehran, following the US  killing of Qassem Soleimani in Baghdad, Iraq. Meanwhile Global Equity Market is expected to push higher next week boosted by the news that Chinese President Xi Jinping’s chief trade negotiator will travel to Washington early next week to sign a phase one trade deal with the U.S.

As such, the 5Y and 10Y spread between the yields on Lebanese Eurobonds and their US comparables rose by 132 bps and 58 bps to 3,715 bps and 2,002 bps respectively.

5 Year Credit Default Swaps, Mid-Prices (in basis points)

Weekly Change of Lebanese Eurobonds Prices