US Bonds Yields Rose as Inflation Expectations Increased
Lebanon is still facing several problems starting by the worldwide pandemic and the financial crisis, ending by political deadlock with failing to form a new government. Moreover,France and the United Nations vowed Wednesday to keep providing humanitarian aid to Lebanon but urged the country’s leaders to form a new government as failing to do so has blocked billions of dollars in assistance.. Furhter, UN Special Coordinator for Lebanon “Jan Kubis” reminded learders in Lebanon that there will be no support without reform plans in order to gain the trust of Lebanese people and international community. Worth mentioning that BDL’s Governor Riad Salameh announced this week that BDL can continue to subsidy the essential good for two more months only.
As a result, 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), dropped weekly by 2.56% to stand at 13.30 points by the week ending December 03, 2020. Meanwhile, the JP Morgan EMBI advanced from last week’s 917.01 to 921.53 points this week.
As such, the yields on the 5 year (5Y) and 10 year (10Y) Lebanese Eurobonds rose by 110 basis points (bps) and 30 basis points (bps) to end the week at 71.90%. and 51.90%, respectively.
In the US, the yields on 5 year and 10 yeald US treasuries, recorderd a weekly increases from 0.39% to 0.40% to end the week at 0.88% to 0.92%, respectively. In fact, a bidpartisan group of US lawmakers proposed a $908B relief bill that would fund measures through the end of March. As such, investors sold US government bonds since higher government spending tends to boost economic growth and inflation, making fixed payments securities less attractive.
As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables widen from last week’s 7,041, bps and 5,072, bps to 7,150, bps and 5,098, bps, repectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 03/12/2020 | 26/11/2020 | |
| Lebanon | N/A | N/A |
| KSA | 67 | 70 |
| Dubai | 119 | 118 |
| Brazil | 154 | 169 |
| Turkey | 366 | 398 |
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 03/12/2020 | 26/11/2020 | Change | 03/12/2020 | 26/11/2020 | Change bps |
| 04/10/2022 | 6.10 | 14.39 | 14.88 | -3.33% | 162.60% | 157.16% | 543 |
| 27/01/2023 | 6.00 | 14.61 | 14.50 | 0.73% | 135.43% | 134.75% | 68 |
| 22/04/2024 | 6.65 | 14.06 | 14.32 | -1.77% | 92.89% | 91.44% | 145 |
| 04/11/2024 | 6.25 | 13.82 | 14.08 | -1.80% | 81.92% | 80.71% | 122 |
| 03/12/2024 | 7.00 | 13.99 | 14.34 | -2.40% | 83.55% | 81.83% | 172 |
| 26/02/2025 | 6.20 | 14.48 | 14.55 | -0.49% | 74.55% | 74.05% | 49 |
| 12/06/2025 | 6.25 | 14.26 | 14.59 | -2.26% | 72.16% | 70.81% | 136 |
| 28/11/2026 | 6.60 | 13.83 | 14.64 | -5.51% | 63.01% | 60.47% | 255 |
| 23/03/2027 | 6.85 | 13.83 | 14.56 | -4.97% | 62.19% | 59.90% | 229 |
| 29/11/2027 | 6.75 | 13.85 | 14.57 | -4.92% | 58.90% | 56.69% | 221 |
| 03/11/2028 | 6.65 | 13.79 | 14.05 | -1.91% | 55.39% | 54.56% | 83 |
| 26/02/2030 | 6.65 | 14.08 | 14.13 | -0.30% | 51.50% | 51.34% | 16 |
| 22/04/2031 | 7.00 | 13.86 | 14.10 | -1.66% | 52.77% | 52.03% | 74 |
| 23/03/2032 | 7.00 | 13.63 | 13.87 | -1.76% | 52.69% | 51.87% | 82 |
| 02/11/2035 | 7.05 | 14.31 | 14.61 | -2.03% | 49.48% | 48.55% | 93 |
| 23/03/2037 | 7.25 | 13.90 | 14.12 | -1.50% | 51.95% | 51.21% | 74 |
Source: BLOMInvest Bank
