US Yields Up following the ECB Statement
Lebanon’s BLOM Bond Index (BBI) declined by 1.08% over the week ending July 25, 2019 to settle at 88.54 points meanwhile the JP Morgan Emerging Markets’ Bond Index (EMBI) recorded a uptick of 0.60% to reach 861.3 points.
In fact, the demand on the 5 year (5Y) and 10Y Lebanese Eurobonds declined over the past week, as their respective yields rose from 11.58% and 10.77%, to 11.77% and 10.88%, respectively. As for the 5Y CDS, it recorded a decrease from 955 basis point by July 18, 2019 to 933 basis point by July 25, 2019.
In the US, the European Central Bank statement led to bonds selloff. As a result, the yields on 5Y and 10Y US treasuries grew from 1.78% and 2.04% to 1.85% and 2.08%, respectively. In details, although investors had expected a cut in interest rate, European Central Bank President Mario Draghi cautioned about going too quickly on policy easing and kept interest rates unchanged at 0%, and its deposit rate at negative 0.4%. Moreover, on Tuesday, bonds prices dropped, pushing yields higher, after reports that U.S. negotiators will visit China next week to restart trade talks giving a lift to stocks and weighed on demand for haven assets.
As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables widen from last week’s 980 and 873 bps, to 992 and 880 bps this week.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
| 5Y Credit Default Swaps (CDS) | ||
| 25/07/2019 | 18/07/2019 | |
| Lebanon | 933 | 955 |
| KSA | 71 | 73 |
| Dubai | 129 | 130 |
| Brazil | 125 | 129 |
| Turkey | 358 | 383 |
Weekly Change of Lebanese Eurobonds Prices
| Prices | Weekly | Yields | Weekly | ||||
| Maturity | Coupon in % | 26/07/2019 | 18/07/2019 | Change | 26/07/2019 | 18/07/2019 | Change bps |
| 12/04/2021 | 8.25 | 93.80 | 93.93 | -0.13% | 12.35% | 12.22% | 13 |
| 04/10/2022 | 6.1 | 85.35 | 85.63 | -0.32% | 11.72% | 11.58% | 15 |
| 27/01/2023 | 6 | 83.69 | 84.04 | -0.42% | 11.82% | 11.65% | 17 |
| 22/04/2024 | 6.65 | 82.08 | 82.33 | -0.30% | 11.67% | 11.57% | 10 |
| 04/11/2024 | 6.25 | 79.59 | 79.94 | -0.44% | 11.51% | 11.39% | 12 |
| 03/12/2024 | 7.00 | 81.92 | 82.03 | -0.13% | 11.62% | 11.58% | 4 |
| 26/02/2025 | 6.20 | 79.63 | 79.88 | -0.31% | 11.20% | 11.12% | 9 |
| 12/06/2025 | 6.25 | 80.17 | 80.38 | -0.26% | 10.90% | 10.84% | 7 |
| 28/11/2026 | 6.60 | 78.67 | 78.92 | -0.32% | 10.89% | 10.82% | 7 |
| 23/03/2027 | 6.85 | 78.81 | 79.17 | -0.45% | 11.01% | 10.92% | 9 |
| 29/11/2027 | 6.75 | 77.79 | 78.17 | -0.48% | 10.86% | 10.77% | 9 |
| 03/11/2028 | 6.65 | 78.08 | 78.42 | -0.43% | 10.38% | 10.31% | 7 |
| 26/02/2030 | 6.65 | 76.53 | 76.67 | -0.18% | 10.35% | 10.32% | 3 |
| 22/04/2031 | 7.00 | 77.24 | 77.38 | -0.18% | 10.40% | 10.37% | 3 |
| 23/03/2032 | 7.00 | 78.21 | 78.29 | -0.11% | 10.08% | 10.07% | 2 |
| 02/11/2035 | 7.05 | 76.31 | 76.19 | 0.16% | 10.03% | 10.05% | -2 |
| 23/03/2037 | 7.25 | 77.13 | 76.92 | 0.27% | 10.04% | 10.08% | -4 |
