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Lebanon Bonds Rally to Fresh Two-year High on Ceasefire Hopes

A man counts Lebanese pounds at a currency exchange shop in Beirut, Lebanon October 1, 2020. REUTERS/Mohamed Azakir
A man counts Lebanese pounds at a currency exchange shop in Beirut, Lebanon October 1, 2020. REUTERS/Mohamed Azakir
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Lebanon Bonds Rally to Fresh Two-year High on Ceasefire Hopes

A man counts Lebanese pounds at a currency exchange shop in Beirut, Lebanon October 1, 2020. REUTERS/Mohamed Azakir
A man counts Lebanese pounds at a currency exchange shop in Beirut, Lebanon October 1, 2020. REUTERS/Mohamed Azakir

Lebanon's deeply distressed sovereign dollar bonds hit a fresh two-year high on Tuesday as investors bet that a potential ceasefire with Israel could improve the country's prospects.

The bonds, which are still trading below 10 cents on the dollar, have gained more than 3% this week. The 2031 maturity was biding at 9.3 cents on the dollar, its highest since May 2022, according to Reuters.

"Some investors are mulling if it is a right time to buy, since a ceasefire is the first step needed to at some point in time restructure bonds," said Bruno Gennari, emerging markets strategist with KNG Securities International.

Israel's cabinet is expected to convene on Tuesday to discuss, and likely approve, a US plan for a ceasefire with the Iran-backed Hezbollah, a senior Israeli official said.

Israeli airstrikes, which continued on Tuesday, have decimated Lebanon's infrastructure and killed thousands.

But the counterintuitive rally, the second since Israel began bombing the country in September, was driven by bets that the deal could jolt Lebanon's fractured political system and revive efforts to pull the country out of default.

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Inflation Rose to 2.3% in Europe. That Won't Stop the Central Bank from Cutting Interest Rates

A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq
A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq
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Inflation Rose to 2.3% in Europe. That Won't Stop the Central Bank from Cutting Interest Rates

A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq
A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq

Inflation in the 20 countries that use the euro currency rose in November — but that likely won’t stop the European Central Bank from cutting interest rates as the prospect of new US tariffs from the incoming Trump administration adds to the gloom over weak growth.
The European Union’s harmonized index of consumer prices stood up 2.3% in the year to November, up from 2.0% in October, the EU statistics agency Eurostat reported Friday.
Energy prices fell 1.9% from a year ago, but that was offset by price increases of 3.9% in the services sector, a broad category including haircuts, medical treatment, hotels and restaurants, and sports and entertainment, The Associated Press reported.
Inflation has come down a long way from the peak of 10.6% in October 2022 as the ECB quickly raised rates to cool off price rises. It then started cutting them in June as worries about growth came into sharper focus.
High central bank benchmark rates combat inflation by influencing borrowing costs throughout the economy. Higher rates make buying things on credit — whether a car, a house or a new factory — more expensive and thus reduce demand for goods and take pressure off prices. However, higher rates can also dampen growth.
Growth worries got new emphasis after surveys of purchasing managers compiled by S&P Global showed the eurozone economy was contracting in October. On top of that come concerns about how US trade policy under incoming President Donald Trump, including possible new tariffs, or import taxes on imported goods, might affect Europe’s export-dependent economy. Trump takes office Jan. 20.
The eurozone’s economic output is expected to grow 0.8% for all of this year and 1.3% next year, according to the European Commission’s most recent forecast.
All that has meant the discussion about the Dec. 12 ECB meeting has focused not on whether the Frankfurt-based bank’s rate council will cut rates, but by how much. Market discussion has included the possibility of a larger than usual half-point cut in the benchmark rate, currently 3.25%.
Inflation in Germany, the eurozone’s largest economy, held steady at 2.4%. That “will strengthen opposition against a 50 basis point cut,” said Carsten Brzeski, global chief of macro at ING bank, using financial jargon for a half-percentage-point cut.
The ECB sets interest rate policy for the European Union member countries that have joined the euro currency.