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Lebanon's Dollar Bonds Gain As Hariri Suspends Resignation

Lebanon's Dollar Bonds Gain As Hariri Suspends Resignation

Thursday, 23 November, 2017 - 08:45
Saad al-Hariri who suspended his decision to resign as prime minister gestures to his supporters at his home in Beirut, Lebanon November 22, 2017. REUTERS/Jamal Saidi

Lebanon dollar bonds gained across the curve while yield premia and credit default swaps fell on Wednesday after Saad al-Hariri suspended his decision to resign as prime minister, easing a major political crisis.

Many of the country’s dollar bonds added around a cent or more and were well on their way to recover most of the losses sustained since Hariri’s shock resignation on Nov 4.

The 2027 dollar issue chalked up the biggest gains, adding 1.68 cents to trade at 94.25 cents.

Meanwhile, the average yield spread of Lebanon sovereign dollar bonds over US Treasuries fell by 9 basis points to 521 bps, their narrowest since Nov 6. Data from IHS Markit showed five-year CDS - the cost of insuring exposure to the Lebanon’s sovereign debt - fell 17 bps from Tuesday’s close to 549 bps.

This information was supported by Lebanese economist Dr. Marwan Iskandar, who explained to Asharq Al-Awsat that "this improvement suggests optimism, which paves the way for a political solution in Lebanon."

"Bonds are being traded on the London Stock Exchange and on international markets, and these bonds are due at a certain point in time after three to 10 years," he said, pointing out that this improvement strengthens the conviction of bond investors in Lebanon's ability to pay off its bonds.

"The Lebanese state has not lagged behind in its bond payments over the past 25 years," he stressed.

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