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1Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
Bank Audi sal - Group Research Department - Bank Audi Plaza - Bab Idriss - PO Box 11-2560 - Lebanon - Tel: 961 1 994 000 - email: [email protected]
CONTACTS
RESEARCH
Treasury & Capital Markets
Micky Chebli
(961-1) 977419
Nadine Akkawi
(961-1) 977401
Bechara Serhal
(961-1) 977421
Private Banking
Toufic Aouad
(961-1) 329328
Corporate Banking
Khalil Debs
(961-1) 977229
Marwan Barakat
(961-1) 977409
Jamil Naayem
(961-1) 977406
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(961-1) 977346
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(961-1) 977470
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(961-1) 964763
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(961-1) 964047
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(961-1) 959615
LEBANON MARKETS: WEEK OF FEBRUARY 17 - FEBRUARY 23, 2014
The LEBANON WEEKLY MONITOR
Economy___________________________________________________________________________
p.2 CABINET FORMATION SPURS IMPROVEMENT IN ECONOMIC OUTLOOK Following a stalemate of 10 months since the new Lebanese Prime Minister was designated, a new
cabinet saw the light last week, leaving a positive impression in business circles and a net improvement
in market conditions.
Also in this issuep.2 Lebanon economy to grow by 2.2% in 2014, according to the EIU
p.4 Lebanon’s Consumer Prices Index rises by 2.9% in the first month of 2013
Surveys___________________________________________________________________________
p.5 BEIRUT’S CENTRAL BUSINESS DISTRICT 24TH MOST EXPENSIVE CITY FOR OFFICE
SPACE GLOBALLY, AS PER CUSHMAN AND WAKEFIELD Cushman and Wakefield published its latest report on most expensive office spaces for 67 cities
around the globe.
Also in this issuep.6 Lebanon in the 91st place globally in the environmental performance index
Corporate News___________________________________________________________________________
p.7 NEW CAR SALES REACH 2,372 IN JANUARY 2014According to data compiled by the Association of Car Importers in Lebanon, the number of newly
registered car sales stood at 2,372 cars in January 2014, against 2,358 cars sold in the corresponding
month of 2013.
Also in this issuep.8 Moulin d’Or opens franchise in Sudan
p.8 FFA Real Estate announces Amchit Bay beach project
p.8 Sama Sannine to launch sales of Sannine Heights in spring
Markets In Brief___________________________________________________________________________
p.9 RISING APPETITE FOR LEBANESE PAPERS FOLLOWING CABINET FORMATION Lebanese capital markets were characterized by a rising momentum during this week on improved
investor sentiment following the cabinet formation, with the equity market registering an increase in
activity that was coupled with price rises, and the Eurobond market recording some local and foreign
appetite for Lebanese debt papers, while the FX market maintained its balanced activity. In details, the
BSE total trading value more than doubled week-on-week to reach circa US$ 12 million, and the price
index moved up by 1.7% to close at 111.64, which is its highest level since April 2013. In parallel, the
Eurobond market saw a local and foreign activity on medium-term to long-term papers. The average
yield pursued its downward slope that has started at the beginning of the year on previous bets about
cabinet formation, and the average spread contracted further by 14 bps to 283 bps, which is its highest
contraction in two months. On the FX market, activity remained balanced, with the LP/US$ interbank
rate ranging between LP 1,502 and LP 1,505, while the BDL remained on the sidelines.
2Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
ECONOMY______________________________________________________________________________
CABINET FORMATION SPURS IMPROVEMENT IN ECONOMIC OUTLOOK
Following a stalemate of 10 months since the new Lebanese Prime Minister was designated, a new cabinet
saw the light last week. The recent government formation has left a positive impression in business circles
and an improvement in market conditions, with the development contributing to an atmosphere of
political calm and a considerable reduction of political bickering.
The primary concerns of the government’s work and content of its ministerial statement are actually
threefold. First, the Cabinet must fight security threats while ensuring the cooperation of all political
parties in confronting this issue. Second, the government urgently needs to fulfill its constitutional
requirements, the most important of which is holding the presidential election on time next May.
Third, the Cabinet must address the crucial issue of reviving the economy following a series of setbacks,
including the diversion of both international and domestic investments, the warnings being applied by
the Arab Gulf and a faltering tourism sector. It is believed that the new cabinet might outline a plan aimed
at improving the macro situation and focusing on re-strengthening economic ties with foreign countries.
Since the government formation, Lebanese officials have received Western signals about launching
international conferences to help Lebanon deal with the large influx of Syrian refugees and support
its institutions, particularly the Army, to enable them to face the threat of terrorism. Western countries
have repeatedly called for the necessity of forming a Cabinet in order to keep open the channels of
communication with the international community. These conferences will begin with the International
Support Group for Lebanon on March 5 in Paris followed by a conference in Rome to support the Army
with military aid at the end of March. The date for a third conference, set to take place in Germany, has
not yet been announced.
The new cabinet formation should also allow the ratification of the decrees that represented obstacles
behind the launch of the gas and oil exploration stage in Lebanon as Lebanon’s first offshore licensing
round has been extended a number of times to 10 April 2014 prior to the recent Cabinet formation. The
latter will now ensure the issuance of two decrees related to the delineation of the Offshore blocks and
the model Exploration and Production agreement by the Lebanese Cabinet. It is worth mentioning in this
respect that out of the ten blocks of the Lebanese offshore, five blocks are open for bidding within the
first licensing round, with the possibility of opening additional blocks for bidding after the cabinet session
that will be convened to ratify the two decrees mentioned above. This actually highlights the importance
of containing and minimizing the cost of delay in an economy that enjoys a huge structural potential.
On that background, the Lebanese economy could now see a relative slight growth improvement in 2014
for a number of domestic and regional considerations. According to the simple average of growth rates
forecasted by 9 foreign institutions that estimate and forecast Lebanon’s GDP, the average real GDP growth
rate is likely to improve in 2014 by at least an additional 1% from the growth reported in 2013. Among the
nine forecasting institutions, eight institutions foresee improving growth rates in 2014, while one foresee
stable growth rate over the year. The possible improvement in growth follows a widening cyclical output
gap over the past few years which could provide a favorable base effect for capacity utilization.
_____________________________________________________________________________
LEBANON ECONOMY TO GROW BY 2.2% IN 2014, ACCORDING TO THE EIU
According to a report published by the Economist Intelligence Unit (EIU), few days before the cabinet
formation, real growth in Lebanon is expected to stand at 2.2% in 2014, up from just over 1% in 2013.
Risks are at the downside given the possibility of the security situation deteriorating further. At the same
time, the economy is expected to grow at an average of 3.6% between 2014 and 2018, with private
consumption and investment being dampened by concerns over security and political risks. The reason
3Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
why Lebanon is still able to register even these modest levels of growth is that it serves as a hub for
moving goods in and out of Syria through both official and unofficial channels, as per the EIU.
Fiscal reform will remain a low priority as policymakers will be preoccupied with the potential for political
unrest. According to the EIU, fiscal reform, mainly the expansion of revenue collection, is vital to the
reduction of the structural deficit. The latter is expected to narrow in the years between 2014 and 2018
but will remain wide at around 7% of GDP in 2018. Some debt restructuring is needed in order to make
manage servicing costs. However, the EIU considers that this is unlikely to happen in the near future.
Inflation is expected to remain low in the above mentioned period. However, the EIU expresses concerns
about the accuracy of government numbers and whether they reflect standing pattern, in particular with
the Central Administration of Statistics (CAS) not publishing data for the first few months of the year.
The current account balance will remain in deficit between 2014 and 2018 but is expected to fall from
around 9% of GDP in 2014 to around 2% of GDP in 2018. Lebanon, which is reliant on energy imports, is
vulnerable to changes in international prices.
The report mentions the role of the central bank in maintaining an accommodative policy stance in order
to support the economy. In fact, the BDL has launched in early-2013 a US$ 1.3 billion stimulus program
through provision of cheap loans to banks that they can extend to customers (at an interest rate capped
at 6%). It has been announced that additional funds will be forthcoming in 2014, albeit at a lower level.
The central bank maintains a policy of holding high levels of foreign reserves at US$ 37 billion as of the
third quarter of 2013, equivalent to 14 to 15 months of import cover, in order to offset any potential flight
to quality.
The awaited oil and gas licensing round has been postponed, again, to April. This has raised doubts over
foreign firms’ interest in participating. In fact, in EIU’s view, political squabbling over the control of the
sector presents risk of regulatory instability to investors.
LEBANON ANNUAL ECONOMIC DATA AND FORECASTS
Sources: Economist Intelligence Unit, Bank Audi's Group Research Department
4Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
_____________________________________________________________________________
LEBANON’S CONSUMER PRICES INDEX RISES BY 2.9% IN THE FIRST MONTH OF 2013
According to the latest data released by the Consultation and Research Institute, Lebanon’s consumer
price index rose by 2.9% between end-2013 and end-January 2014. On an annual basis, the inflation rate
reached 2.5% in January 2014. The 12-month moving average stood at 2.5% in January 2014.
The rise seen between end-2013 and end-January 2014 was tied to a price increase posted by the following
components: food and beverages (+6.2%), miscellaneous goods and services (+5.4%), housing (+3.5%),
transportation and telecommunications (+0.5%), recreational services (+0.3%), and apparel (+0.3%).
With regards to the food and beverages component, the price increase was mainly driven by a rise in
the following sub-components: food (+6.7%), vegetables (+34.7%), fruits (+13.2%), and fish and seafood
(+10.5%).
The cost of the miscellaneous category of good and services was driven by a 10.8% increase in the price
of jewelry along with a 4.7% increase in the price of personal care.
The cost of housing services was higher on account of an increase in the fees for household energy
which moved up by 5.2% between end-2013 and end-January 2014. With regards to transportation
and telecommunications, they became more costly as a result of a 0.5% rise in the fees for the former
mentioned component.
The fifth item to have driven the overall CPI increase was recreational services which were higher by 0.3%
between end-2013 and end-January 2014 due to a 1.9% increase in the cost of reading material and
photography. Finally, apparel goods were the sixth item to have supported the overall increase in the
CPI with their prices moving up by 0.3% on account of a 1.9% increase in the cost of clothing and sewing
materials.
CONSUMER PRICE INDEX (12-MONTH MOVING AVERAGE OF EACH YEAR)
Sources: Consultation and Research Institute, Bank Audi's Research Department
5Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
SURVEYS_____________________________________________________________________________
BEIRUT’S CENTRAL BUSINESS DISTRICT 24TH MOST EXPENSIVE CITY FOR OFFICE
SPACE GLOBALLY, AS PER CUSHMAN AND WAKEFIELD
Cushman and Wakefield published its latest report on most expensive office spaces for 67 cities around
the globe. Beirut came out as the 24th most expensive city in 2014, maintaining the rank registered in
2013. It came directly after the cities of Taipei (Taiwan) and Amsterdam (the Netherlands). On the other
hand, it has outpaced Dublin (Ireland) and Jakarta (Indonesia).
The occupancy cost in Beirut’s Central Business District (CBD), including rents and additional costs, came
at € 505 per square meter per year. Cushman and Wakefield considers the CBD office figures as related to
new prime centre, high specification units of a standard size corresponding to demand in each location.
OCCUPANCY RATE(€)/ SQM/ YEAR IN MOST EXPENSIVE LOCATION IN EACH COUNTRY
Sources: Cushman and Wakefield, Bank Audi's Group Research Department
6Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
In the MENA region, the yearly cost of office space in Beirut’s Central Business District, at € 505 per
square meter, came in directly after Dubai International Financial Center (DIFC) with € 734 /SQM/year
and Doha’s CBD with € 659 /SQM/year, and ahead of Manama and Amman with € 231 and € 179 /SQM/
year, respectively. The Middle East saw a buoyant rental market, with prime rents up by as much as 10%
in certain locations.
On the global level, the offices’ market witnessed prime rents increase by 3% in 2013, which is the third
consecutive year of a similar rental performance. London’s West End emerged as the most expensive
office market across the world for the second consecutive year with € 2,122 /SQM /year, outpacing each
of Hong Kong Central and Moscow’s CBD with € 1,432/SQM /year and € 1,092 /SQM /year, respectively.
____________________________________________________________________________
LEBANON IN THE 91ST PLACE GLOBALLY IN THE ENVIRONMENTAL PERFORMANCE
INDEX
The 2014 Environmental Performance Index (EPI) for the year 2014 has been recently published by both
Yale and Columbia Universities, in collaboration with the World Economic Forum. According to the 2014
EPI, Lebanon ranked 91st out of 176 surveyed countries.
The Environmental Performance Index (EPI) ranks how well countries perform on high-priority
environmental issues in two broad policy areas: protection of human health from environmental harm
and protection of ecosystems. Within these two policy objectives, the EPI scores country performance
in nine issue areas comprised of 20 indicators. Indicators in the EPI measure how close countries are to
meeting internationally established targets or, in the absence of agreed-upon targets, how they compare
to the range of observed countries.
On a regional level, Lebanon came directly after each of Morocco and Bahrain while it outpaced each of
Algeria and Oman. On a global level, Lebanon was outpaced by Belize and Nicaragua while it surpassed
each of Algeria and Argentina.
MENA COUNTRIES GLOBAL RANKS IN THE ECONOMIC PERFORMANCE INDEX
Sources: Economic Performance Index, Bank Audi's Group Research Department
7Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
CORPORATE NEWS_____________________________________________________________________________
NEW CAR SALES REACH 2,372 IN JANUARY 2014
According to data compiled by the Association of Car Importers in Lebanon, the number of newly
registered car sales stood at 2,372 cars in January 2014, against 2,358 cars sold in the corresponding
month of 2013.
According to the same source, new car sales in January 2014 compare with 3,414 new car sales in
December 2013. Moreover, the total number of registered new and imported used cars dropped by 21%
in January 2014 in comparison with December 2013.
It is worth noting that 90% of newly registered cars consist of those of smaller sizes. The luxury cars
represent only 2% of the total new cars registered. The orientation of the market toward the small cars
is due to high fuel prices, to the absence of an adapted and structured public transport, and to the very
strong competition between the makes.
Korea’s Kia ranked first in terms of new car registration in January 2014 with a total of 541 cars, against a
total of 538 cars in the same month of 2013. It was followed by Korea’s Hyundai with a total of 361 newly
registered cars in January 2014, lower than the total of 468 cars registered in the corresponding month
of 2013.
Japan’s Toyota came third with 337 newly registered cars in January 2014, up from 125 cars recorded
in the same month of 2013. Fourth was Japan’s Nissan with 257 newly registered cars in January 2014,
compared with a total of 326 cars recorded in the corresponding month of 2013. France’s Renault ranked
fifth with 92 newly registered cars in January 2014, versus a total of 101 cars posted in January 2013.
A breakdown by continent shows that 902 newly registered cars came from Korea in January 2014, down
by 10% from 1,006 cars recorded in January 2013. Those from Japan amounted to 818 cars in January
2014, against 566 cars in January 2013. They were followed by European cars with a total of 496 vehicles
in January 2014, down by 17% from 596 cars recorded in January 2013. Then came those from the US
with 121 cars in January 2014, down by 19% from the total of 149 cars recorded in January 2013.
TOP TEN BRANDS OF NEWLY REGISTERED CARS IN JANUARY 2014
Sources: Association of Car Importers in Lebanon, Bank Audi's Group Research Department
8Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
_____________________________________________________________________________
MOULIN D’OR OPENS FRANCHISE IN SUDAN
Local bakery Moulin d’Or signed a master franchising agreement with the Sudanese N&B food company,
part of the Sudan Elnefeidi Group Holding, with diversified activities representing major international
brands in Sudan.
N&B invested US$ 15 million in the franchising agreement with Moulin d’Or, which would launch a
production facility and a retail store in Khartoum during the second quarter of 2015.
The total area of the production facility would measure 12,000 square meters, and the retail store at 500
square meters.
According to the CEO of Moulin d’Or, the company would be charging royalty fees on the daily turnover,
and the franchisee would be paying for the staff’s compensation in Sudan.
The company is also planning further expansions in Sudan, South Sudan and various countries in the
African continent, as per the same source.
______________________________________________________________________________
FFA REAL ESTATE ANNOUNCES AMCHIT BAY BEACH PROJECT
FFA Real Estate, a member of FFA Private Bank Group, announced that it would be managing the
development of a new beach project called Amchit Bay for a group of local investors. A senior executive
at FFA Real Estate said that construction works would commence during 2014, and the project would be
finalized within two years.
Amchit Bay would stretch over 10,000 square meters of coastal land, and would have a built-up area of
9,000 square meters. The project would reach an investment of US$ 25 million, including the cost of land.
Amchit Bay consists of seaside chalets, totaling six villas and 19 residences, and frontage onto 80 meters
of coastline. The project would include 2,000 square meters of common landscaped green space, with a
fitness area, pool, clubhouse and children’s playground.
______________________________________________________________________________
SAMA SANNINE TO LAUNCH SALES OF SANNINE HEIGHTS IN SPRING
Sama Sannine, a mixed-use project under construction, plans to launch sales of its first phase in April
2014. The 66,000 square meter project is owned by three partners including Saudi-based Amnest Group.
The project comprises Sannine Village and Mountview Hotel.
The first phase of Sannine Village, called Sannine Heights, is composed of four blocks, with four 159
square meter duplexes.
The second and third phases of Sannine Village are The Hillside and The Nest projects, each made up of
eight blocks with 149 square meter chalets.
The fourth phase includes The Courtyard project, which is made up of three large connected blocks, with
four 159 square meter chalets each. As for Mountview Hotel, it includes 44 VIP rooms, two restaurants,
spa and nightclub.
9Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
CAPITAL MARKETS_____________________________________________________________________________
MONEY MARKET: SIGNIFICANT EXPANSION IN LP CDS PORTFOLIO IN 2013
The money market maintained its regular norms, with the local currency liquidity remaining quite
abundant and the overnight rate standing at its low official level of 2.75% set by the Central Bank of
Lebanon. As to Certificates of Deposits, the Central Bank of Lebanon sold this week LP 15 billion in the
45-day category and LP 1 billion in the 60-day category. Interest rates on these two categories stood
unchanged at 3.57% and 3.85% respectively. In addition, the latest figures released by the Association of
Banks in Lebanon showed that the weighted average rate on LP CDs stood at 8.54% at end-December
2013, as compared to 8.62% at end-November 2013 and 9.28% at end-December 2012. The outstanding
CDs portfolio reached LP 33,815 billion at end-December 2013, down from LP 34,196 billion at end-
November 2013, yet significantly up from LP 23,073 billion at end-December 2012.
At the monetary aggregates level, figures for the week ending 6th of February 2014 released this week
showed a decline in local currency deposits of LP 195 billion, as a result of an increase of LP 84 billion in
LP time deposits and a fall of LP 279 billion in LP demand deposits week-on-week. Deposits in foreign
currencies dropped by US$ 98 million. These weekly variations compare to an average weekly rise of
LP 106 billion for LP deposits, and an average weekly decrease of US$ 62 million for foreign currency
deposits since the beginning of the year 2014. Total money supply in its large sense (M4) expanded by
LP 338 billion. This compared to an average weekly contraction of LP 45 billion since the beginning of
the year 2014.
On a cumulative basis, money supply in its large sense (M4) widened by LP 302 billion since the beginning
of the year 2014. This is the result of a rise in local currency denominated time deposits of LP 665 billion, a
decrease in foreign currency deposits of LP 339 billion (the equivalent of US$ 225 million), a contraction
in money supply (M1) of LP 486 billion, and a growth in Treasury bills held by the public of LP 462 billion.
_____________________________________________________________________________
TREASURY BILLS MARKET: A 30 BPS RISE IN WEIGHTED AVERAGE YIELD ON TBS IN 2013
The secondary Treasury bills market continued to be marked by some local activity on the 12-year category,
which was traded at 8.59%. At the level of the primary market, the latest auction’s results (February 20,
2014) showed stability in the average yields on the one-year, two-year and three-year categories at 5.35%,
5.84% and 6.50% respectively. Also, the auction results for value date 13th of February 2014 released
by the Central Bank of Lebanon showed that total subscriptions amounted to LP 251 billion and were
distributed as follows: LP 17 billion in the three-month category, LP 152 billion in the six-month category,
and LP 82 billion in the five-year category. These compare to maturities of LP 16 billion, resulting in a
nominal surplus of LP 235 billion.
The latest monthly report released by the Association of Banks in Lebanon showed that the weighted
average yield on outstanding LP Treasury bills stood at 6.88% at end-December 2013, versus 6.89% at
end-November 2013 and 6.58% at end-December 2012.
INTEREST RATES
Source: Bloomberg
10Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
TREASURY BILLS
Sources: Central Bank of Lebanon, Bloomberg_____________________________________________________________________________
FOREIGN EXCHANGE MARKET: SIGNIFICANT GROWTH IN BDL’S FOREIGN ASSETS
The foreign exchange market maintained its balanced activity during this week, while commercial banks
traded the US Dollar at a rate hovering between LP 1,502 and LP 1,505. Meanwhile, the Central Bank of
Lebanon remained on the sidelines throughout the week.
The Central Bank of Lebanon’s latest bi-monthly balance sheet ending 15th of February 2014 showed
that foreign assets grew by US$ 674 million during the first half of February to reach US$ 36.3 billion mid-
February. Accordingly, the Central Bank’s foreign assets covered 79.6% of LP money supply mid-February
2014, with this coverage ratio rising to 105.7% when accounting for gold reserves estimated at US$ 11.9
billion. In addition, the BDL’s foreign assets covered 20.5 months of imports. These ratios shed light on the
Central Bank’s strong ability to defend the currency peg and meet demand for foreign currencies should
any pressures rise.
EXCHANGE RATES
Source: Bank Audi’s Group Research Department_____________________________________________________________________________
STOCK MARKET: BSE PRICE INDEX UP BY 1.7% ON IMPROVED INVESTOR SENTIMENT
The equity market was marked this week by a rise in activity that was coupled with price increases, mainly
supported by improved investor sentiment following the cabinet formation. The total trading value more
than doubled week-on-week, moving up from US$ 5.2 million last week to US$ 11.7 million this week.
The average daily trading value surged from US$ 1,302 million last week to US$ 2,330 million this week,
triggering a 78.9% jump in the trading volume index to 100.41. The total number of traded shares went
up from 699,783 shares last week to 1,227,407 shares this week. As far as prices are concerned, the BSE
price index went up by 1.7% to 111.64, which is its highest level since April 2013.
11Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
EUROBONDS INDICATORS
Source: Bank Audi’s Group Research Department
AUDI INDICES FOR BSE
Sources: Beirut Stock Exchange, Bank Audi’s Group Research Department
Solidere shares captured 53.08% of activity. Solidere “A” share price rose by 3.8% to close at US$ 13.50, and
Solidere “B” share price surged by 4.4% to US$ 13.38. Banking shares accounted for 46.85% of the total
trading value. Bank Audi’s “listed” share price increased by 1.1% to US$ 6.44. Bank Audi’s GDR price stood
unchanged at US$ 6.60. BLOM’s “listed” share price went up by 2.9% to close at US$ 8.75. BLOM GDR’s
price increased by 3.1% to US$ 9.18. Byblos Bank’s “listed” share price closed 1.8% higher at US$ 1.68. As
to industrial stocks, Holcim’s share price stood unchanged at US$ 14.50.
The Beirut Stock Exchange’s weekly performance compared to an increase of 0.9% in broader Arabian
markets’ share prices (as per S&P Pan-Arab Composite Index) and a 0.3% rise in broader emerging markets’
share prices (as per S&P Emerging Frontier Super Composite Index).
_____________________________________________________________________________
BOND MARKET: FURTHER RISE IN BOND PRICES FOLLOWING CABINET FORMATION
The Eurobond market was characterized by improved investor sentiment this week following the cabinet
formation. This triggered a rise in local and foreign activity on Lebanese debt papers maturing between
2017 and 2027, driving prices up and resulting into contractions in spreads. In details, the weighted
average bond yield continued to follow a downward trajectory, declining by 14 bps week-on-week to
reach 4.73%, and the average spread contracted further by 14 bps to close at 283 bps amidst a significant
drop in Lebanese yields and a small rise in international benchmark yields. For instance, the five-year
US Treasury yields increased from 1.52% last week to 1.55% this week amidst bets that weaker-than-
expected US economic data resulted from harsh winter weather and won’t keep the US Federal Reserve
from reducing bond purchases further. As to the cost of insuring debt, Lebanon’s five-year CDS spread
hovered between 370-390 bps this week versus 370-400 bps in the previous week.
12Week 08 February 17 - February 23, 2014
FEBRUARY 17 - FEBRUARY 23, 2014
WEEK 08
INTERNATIONAL MARKET INDICATORS
Sources: Bloomberg, Bank Audi's Group Research Department
___________________________________________________________________________DISCLAIMER
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