Higher US Treasuries Demand in Light of Stock Market Jitter

Lebanon’s BLOM Bond Index (BBI) recorded a downtick by 1.21% over the last week to reach 87.32 points due to a lower demand for 5Y and 10Y Lebanese Eurobonds and the JP Morgan Emerging Markets’ Bond Index (EMBI) witnessed also a 0.45% weekly decline to stand at 767.66 points. As such, the yields on the (5Y) and (10Y) Lebanese Eurobonds increased by 28 and 30 basis points (bps) to reach 10.76%  and 10.70% respectively .

In the US, the yields on the 5Y and 10Y treasuries witnessed a weekly decrease of 5 bps each and ended the week at 3% and 3.14% respectively explained by a higher demand for 5Y and 10Y US treasuries. On Wednesday, Wall Street stocks plunged with major indices losing more than 3% marking the highest single-session fall since Feb. 8. The drop can be linked, to the shake in the investor’s confidence due to the jump in US interest rates and worries of a global growth slowdown. In fact, the International Monetary Fund cut its growth forecast for the global economy in 2018 and 2019 to 3.7%—0.2% below its prior estimate in the wake of increasing trade tensions between the U.S. and China.

During the week, the 5Y and 10Y spread between the yield on the Lebanese Eurobonds and their US counterparts widened by 33 and 35 basis points (bps)  to reach 776 and 756 bps respectively.

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

 Weekly Change of Lebanese Eurobonds Prices