Federal Reserve to Take New Actions 

For the week of 23 September 2021, new Lebanese Cabinet to proceed in talks with the International Monetary Fund following Central Bank’s action plan on lifting the subsidies on gasoline by end of September. Moreover, Finance Minister Youssef Khalil and Central Bank Governor Riad Salameh have met to set a rescue economic plan following that of former Prime Minister Hassan Diab.

In addition, Prime Minister Najib Mikati is expected to visit President Macron in Paris on Friday 24^th to discuss the government’s plan and facilitate reforms’ implementation, noting that the Lebanese government has just eight months before elections.

As such, 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), jumped by 4.19% to stand at 17.35 points by the week ending September 23, 2021 compared to the week of September 16, 2021. Meanwhile, the JP Morgan EMBI slightly decreased from 940.0 to 932.42 during the period.

In addition, the yields on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds decreased by 265 basis points (bps) and 165 (bps) to end up the period at 62.50% and 46.10%, respectively.

In the US, the yields on 5 year treasuries and 10 year US treasuries recorded a slight uptick from the week ending September 16, 2021 from 0.84% to 0.94% and 1.34% to 1.41% by the week ending September 23.

As such, this week the Federal Reserve is expected to send its clearest signal after its low-interest rate policies later this year, the first step toward soothing the extraordinary support it has provided the economy since the pandemic hit 18 months ago.

Moreover, Fed Chair Jerome Powell added that “clear progress” had been achieved in job growth and that if hiring remained healthy, it “could be appropriate” to start reducing the bond purchases this year. The weak August jobs report made it less likely that the Fed would formally announce a reduction in September and more likely it would do so in November or December.

In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable went down from 6,431 bps and 4,641 bps to 6,156 bps and 4,469 respectively.

Weekly Change of Lebanese Eurobonds Prices 

Source: BLOMInvest Bank