Demand on US Treasuries Rose as Concerns Arise on Funding the Ambitious Tax Cuts Announced this Week
Over the past week, the BLOM Bond Index (BBI) gained an incremental 0.11%, to end the week at 102.38 points. However, the BBI was surpassed by the JP Morgan Emerging Markets’ Bond Index (EMBI) which rose by 0. 94%, to end the week at 807.66 points.
Demand was shy on the Lebanese Eurobonds maturing in 5 and 10 years, as their respective yields rose from 6.35% and 7.20% to 6.47% and 7.25% during the week extending from Oct. 31st to Nov.3rd 2017.
In the USA, the week was packed: first, the FOMC met Tuesday and left interest rates unchanged; second, the House of Republicans released an overhauled tax bill Thursday, and third, president Trump announced Powell as his pick for FED chair. Nonetheless, it was the reforms announced to the tax legislation that shook markets, particularly sending demand for US treasuries up this week. On the back of the ambitious tax cuts proposed for companies and individuals, the market remained skeptical on how these will be funded without magnifying the national deficit.
As such, yields on the US treasuries maturing in 5 and 10 years slipped from 2.07% and 2.46% last week, to 2.00% and 2.35% this week, respectively.
The 5Y and 10Y spreads between the Lebanese Eurobonds and their US comparables climbed from last week’s 428 bps and 474 bps to 447 bps and 490 bps, respectively.
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 02/11/2017 | 26/10/2017 | Change | 02/11/2017 | 26/10/2017 | Change bps |
| 23/04/2019 | 5.5 | 100.4 | 100.25 | 0.15% | 5.21% | 5.32% | -11 |
| 20/05/2019 | 6 | 101.15 | 101 | 0.15% | 5.22% | 5.32% | -11 |
| 28/11/2019 | 5.45 | 100.25 | 100 | 0.25% | 5.32% | 5.45% | -13 |
| 09/03/2020 | 6.375 | 101.63 | 101.5 | 0.13% | 5.62% | 5.69% | -6 |
| 14/04/2020 | 5.8 | 100.15 | 99.88 | 0.27% | 5.73% | 5.85% | -12 |
| 19/06/2020 | 6.15 | 100.88 | 100.63 | 0.25% | 5.78% | 5.89% | -10 |
| 12/04/2021 | 8.25 | 106 | 106 | 0.00% | 6.28% | 6.29% | -1 |
| 04/10/2022 | 6.1 | 98.63 | 99.13 | -0.50% | 6.43% | 6.31% | 12 |
| 27/01/2023 | 6 | 97.25 | 97.38 | -0.13% | 6.63% | 6.60% | 3 |
| 22/04/2024 | 6.65 | 98.63 | 98.63 | 0.00% | 6.92% | 6.92% | 0 |
| 04/11/2024 | 6.25 | 96.25 | 96.25 | 0.00% | 6.93% | 6.93% | 0 |
| 03/12/2024 | 7.00 | 100.13 | 100.25 | -0.12% | 6.97% | 6.95% | 2 |
| 26/02/2025 | 6.20 | 95.38 | 95.13 | 0.26% | 7.02% | 7.06% | -4 |
| 12/06/2025 | 6.25 | 95.38 | 95.13 | 0.26% | 7.04% | 7.09% | -4 |
| 28/11/2026 | 6.60 | 96.38 | 96.25 | 0.14% | 7.15% | 7.17% | -2 |
| 23/03/2027 | 6.85 | 97.63 | 97.63 | 0.00% | 7.20% | 7.20% | 0 |
| 29/11/2027 | 6.75 | 96.38 | 96.75 | -0.38% | 7.26% | 7.21% | 5 |
| 03/11/2028 | 6.65 | 95 | 94.5 | 0.53% | 7.32% | 7.39% | -7 |
| 26/02/2030 | 6.65 | 94 | 94 | 0.00% | 7.40% | 7.40% | 0 |
| 22/04/2031 | 7.00 | 96.25 | 96.25 | 0.00% | 7.45% | 7.45% | 0 |
| 23/03/2032 | 7.00 | 95.63 | 95 | 0.66% | 7.50% | 7.57% | -7 |
| 02/11/2035 | 7.05 | 94.75 | 95 | -0.26% | 7.59% | 7.56% | 3 |
| 23/03/2037 | 7.25 | 95.5 | 94.5 | 1.06% | 7.70% | 7.80% | -10 |
