Free Falling Lebanese Eurobonds Traded Below 7 Cents
The Lebanese Eurobonds market is following a free fall for the fourth consecutive week and traded below the 7 cents as the progress in achieving a deal with the IMF or conducting a recovery plan is far from being implemented in the near future. “Lebanon has lost precious time and several opportunities to adopt a path to reform” as stated by World Bank Regional Director, Mr. Saroj Kumar Jha. The cost of negligence is badly reflected on the Lebanese Bonds market as well as continuing to be the main driver of the crisis. Under these circumstances, the parliament has yet to pass laws for the recovery plan agreed on in the last official meeting of the Cabinet. Noting, however that the recovery plan is subject to changes
Amid these disruptions, 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), recorded further drops of 40.69% YTD and 17.30% weekly to stand at only 6.50 points by the week ending June 30, 2022 compared to the week of June 23, 2022. As for the JP Morgan EMBI, it slightly retreated by 1.22% to stand at 746.44 by the end the week of June 30, 2022, compared to 755.68 at the end of the week of June 23, 2022.
Furthermore, the yield on the 5 years (5Y) and 10 years (10Y) Lebanese Eurobonds registered a notable increase of 2,400 and 1,085 basis points (bps), respectively to end the week of June 30, 2022 at 131.40% and 101.10%.
This week in the US, “recession and inflation are still on investors’ mind. Despite that the Federal Reserves has accredited possible recession risk in the upcoming period, Fed Chair Powell claimed GDP growth to be projected on a steady pace of 1.7-1.9% with a soft landing. However, from the bond market perspective, yields recoded a slight drop this week indicating that investors are turning on to lower risky investments represented by demand on the US T-bills. Concerns would continue to mount until the Fed started to cut rates back. But, in the foreseeable future.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded an increase from 10,426 bps and 8,716 bps to 12,839 bps and 9,812 bps by the week ending June 30, 2022.
| 5Y Credit Default Swaps (CDS) | ||
| 30/06/2022 | 23/06/2022 | |
| Lebanon | . | . |
| KSA | 70 | 65 |
| Dubai | 139 | 124 |
| Brazil | 295 | 293 |
| Turkey | 833 | 793 |
| Source: Bloomberg | ||
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 30/06/2022 | 23/06/022 | Change | 30/06/2022 | 23/06/2022 | Change bps |
| 22/04/2024 | 6.65 | 6.42 | 7.50 | -14.40% | 273.31% | 247.58% | 2573 |
| 04/11/2024 | 6.25 | 6.39 | 7.53 | -15.08% | 204.61% | 185.39% | 1922 |
| 03/12/2024 | 7.00 | 6.36 | 7.85 | -18.95% | 206.22% | 181.50% | 2472 |
| 26/02/2025 | 6.20 | 6.34 | 7.58 | -16.44% | 181.29% | 162.63% | 1866 |
| 12/06/2025 | 6.25 | 6.67 | 7.94 | -16.04% | 162.22% | 145.86% | 1637 |
| 28/11/2026 | 6.60 | 5.96 | 7.53 | -20.74% | 132.10% | 113.11% | 1899 |
| 23/03/2027 | 6.85 | 5.79 | 7.76 | -25.41% | 131.47% | 107.48% | 2399 |
| 29/11/2027 | 6.75 | 6.34 | 7.56 | -16.17% | 116.60% | 102.43% | 1418 |
| 03/11/2028 | 6.65 | 6.34 | 7.54 | -15.82% | 108.77% | 95.02% | 1375 |
| 26/02/2030 | 6.65 | 6.04 | 7.44 | -18.83% | 109.44% | 91.23% | 1821 |
| 22/04/2031 | 7.00 | 6.87 | 7.71 | -10.90% | 100.58% | 90.63% | 995 |
| 23/03/2032 | 7.00 | 6.78 | 7.64 | -11.36% | 101.13% | 90.41% | 1072 |
| 02/11/2035 | 7.05 | 7.05 | 7.30 | -3.47% | 97.98% | 94.85% | 313 |
| 23/03/2037 | 7.25 | 5.96 | 7.64 | -21.96% | 117.53% | 92.85% | 2468 |
Source: BLOMInvest Bank
