Optimism Earlier this Week Regarding Government Formation Drove Eurobonds Up
| 06/02/2025 | 30/01/2025 | Change | Year to Date | |
| BLOM Bond Index (BBI) | 17.97 | 16.45 | 9.22% | 35.18% |
| Weighted Yield | 87.07% | 92.20% | -5.57% | -15.93% |
| Weighted Spread | 8,281 | 8,795 | -5.84% | -16.58% |
The BLOM Bond Index (BBI), which tracks Lebanese government Eurobonds (excluding coupon payments), rose by 9.22% this week to 17.97 points and remarkably by 35.18% since year start. The increase is attributed to progress in the formation of the first government in the reign of the newly elected President Joseph Aoun. Moreover, reports this week revealed that the negotiation between the appointed Prime Minister Mr. Nawwaf Salam and political parties, especially regarding Finance Minister, were going smooth and that a reform government could be formed shortly. In addition, many traders are anticipating that Lebanese political parties have to approve on forming a newly capable and transparent cabinet. This is due to the fact that Western and Arab donors are demanding a reform committed cabinet that is not controlled by the armed political party Hezbollah before providing aid in reconstruction and signing investment deals with the Lebanese Republic.
| 06/02/2025 | 30/01/2025 | Change | |
| BBI | 17.97 | 16.45 | 9.22% |
| JP Morgan EMBI | 914.79 | 908.57 | 0.68% |
| 5Y LEB | 88.00% | 92.75% | (475) |
| 10Y LEB | 63.80% | 67.50% | (370) |
| 5Y US | 4.28% | 4.31% | (3) |
| 10Y US | 4.45% | 4.52% | (7) |
| 5Y SPREAD | 8,372 | 8,844 | (472) |
| 10Y SPREAD | 5,935 | 6,298 | (363) |
In the U.S., yield curve shifted lower over the course of the week as five and ten years’ yields dropped by 3 and 7 bps to stand at 4.28% and 3.45% respectively on February 6th, 2025 compared to the previous week. The decrease in yield this week is attributed to several events. First, Trump’s previous comments regarding implementing 25% tariffs on imports from Mexico and Canada were put on hold for a month leaving room for negotiations with the two neighboring countries. Moreover, a call between the US and Chinese presidents is expected to occur in the near future that might lead to removing the 10% tariffs that took effect on Tuesday. Furthermore, US labor market showed some resilience as 180,000 new jobs were created in January. In addition, soft US economic data as ISM Services PMI data declined from 54 in December to 52.8 in January, along with the relieve of the global trade war rose expectations regarding lowering borrowing costs. The latter was supported by Treasury Secretary Scott Besent who told Fox Business that the Trump administration is focusing on 10-year treasury yields more than interest rate cuts.
In turn, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparable recorded a decline from 8,844 and 6,298 bps to 8,372 and 5,935 bps respectively by the week ending February 6th, 2025 compared to prior week.
| 5Y Credit Default Swaps (CDS) | ||
| 06/02/2025 | 30/01/2025 | |
| KSA | 61.68 | 61.58 |
| Dubai | 59.52 | 59.63 |
| Brazil | 173.70 | 177.73 |
| Turkey | 254.52 | 258.15 |
| Source: Bloomberg | ||
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 06/02/2025 | 30/01/2025 | Change | 06/02/2025 | 30/01/2025 | Change bps |
| 28/11/2026 | 6.6 | 17.37 | 15.84 | 9.69% | 146.34% | 154.79% | -844.97 |
| 23/03/2027 | 6.85 | 17.333 | 15.89 | 9.07% | 124.61% | 131.25% | -664.40 |
| 29/11/2027 | 6.75 | 17.365 | 15.89 | 9.30% | 95.06% | 100.44% | -538.94 |
| 03/11/2028 | 6.65 | 17.365 | 15.87 | 9.43% | 74.35% | 78.71% | -436.34 |
| 26/02/2030 | 6.65 | 17.282 | 15.90 | 8.73% | 60.05% | 63.44% | -338.99 |
| 22/04/2031 | 7 | 17.335 | 15.89 | 9.12% | 53.99% | 57.37% | -338.50 |
| 23/03/2032 | 7 | 17.329 | 15.88 | 9.11% | 50.35% | 53.62% | -327.55 |
| 02/11/2035 | 7.05 | 17.356 | 15.88 | 9.30% | 43.47% | 46.84% | -336.30 |
| 23/03/2037 | 7.25 | 17.353 | 15.88 | 9.31% | 43.38% | 46.92% | -354.08 |
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