(Banque du Liban et d’Outre Mer ) –Foreign exchange market: the Lebanese pound slipped further against the U.S. dollar on the local foreign exchange market, being quoted in interbank trading at LP1, 513-14 against LP1, 512-13 a week before. The Central Bank remained on the sidelines, not seeing the need to intervene given that demand for the dollar was only slightly higher.
With parliamentary elections scheduled for end-August and beginning of September, serious discussion of economic issues is on hold until a new government is formed. At that point in time, investors ought to have a better idea of the government’s plans to extricate itself and the country from the economic quagmire that both currently find themselves in. In the meantime, Israeli violations of the southern border are providing something of a sideshow, but nothing more.
The level of TB subscriptions as well as the amount of maturing TBs saw an increase on July 6 th of 25.7 percent and 8.9 percent to LP430billion ($285.24million) and LP307billion ($203.65million) respectively. The 24-M TB naturally continues to be investors’ favored haven for local currency funds, offering the highest yield, as it captured 76 percent of purchases on July 6 th .On the other hand, the shares of the 3-M, 6-M and 12-M TBs were similar to the previous week at around 12 percent, 10 percent and 12 percent respectively.
Certificate of deposits witnessed no sale whatsoever, as banks showed no inclination to buy CDs since they could fully satisfy their requirements for LP assets with higher yielding T-bills.
The Eurobond market reverted to its normal quiet mode, particularly given the summer season. What activity there was appeared concentrated in the recently issued sovereign 05 bond, which continued to attract demand, helping maintain its price above par. Corporate trade was illiquid, with not even any news of potential new issues to entertain the market as previous rumors have now died down.
U.S. Treasuries headed south this week, initially weighed down by new corporate and agency issues but then taking a battering from various economic data. First-up was retail sales, showing a 0.5 percent rise in June but being revised upward for May from a 0.3 percent decline to a 0.3 percent gain. The Labor Department then reported the June Producer Price Index (PPI) increased 0.6 percent overall, largely due to high oil prices, although the core PPI was actually down 0.1 percent, helping to calm players down somewhat. However, the real damage had been done by the upward revision to the May retail sales. Originally there had been relief that a decline reflected a slowing down of consumer demand, but the data revision raised expectations of further possible Fed credit tightening.