Troubled Lebanese Eurobonds recorded their highest levels since before Lebanon announced a default on its debts in March 2020, driven by improved expectations regarding the path of economic and financial reforms following the visit of the International Monetary Fund mission to Beirut.
A report issued by Blom Invest Bank stated that the Blom Lebanon Bond Index rose by 0.48 percent during the week ending September 25, reaching 29.8 points, compared to 29.66 points in the previous week. In the same context, the prices of bonds due between 2027 and 2037 ranged between 28.14 and 30 cents per dollar, coinciding with a decline in 5- and 10-year bond yields by about 10 basis points to reach 45.90 and 29.75 percent, respectively, in addition to a contraction in the credit spread for 5 years to 4,087 basis points, and for 10 years to 2,457 basis points.
This recovery came in the wake of an enjoyable visit between September 15 and 18 by the International Monetary Fund mission to Lebanon, during which it discussed economic conditions and the progress made in financial and banking reforms. The Fund praised the tangible progress in several files, the maintenance of a minimum level of macroeconomic stability, and the progress in public financial management, in addition to the approval of amendments to the law redressing the conditions of banks.
On the other hand, the IMF stressed the need to amend the Financial Stability and Deposit Recovery Law (Financial Gap Law) to ensure the protection of depositors and respect for the priority order of claims, in addition to achieving a viable banking sector through the restructuring process. The mission also expected a significant contraction in Lebanese economic activity during 2026, with inflation remaining at double-digit levels and the current account deficit widening, driven by rising energy costs.
For its part, Bloom Invest indicated that this positive performance reflects a relative improvement in investors’ perception of the reform path, but it remains surrounded by serious economic and security risks, in light of the continuing Israeli strikes in southern Lebanon and the escalation of regional tensions.
Despite this jump, Eurobond prices are still trading below a third of their nominal value, while long-term bond yields exceed 29 percent, which reflects the markets’ pricing of high levels of risk. The continuation of this rise depends on the ability of the official authorities to translate reform promises into actual measures, especially with regard to restructuring the banking sector, addressing the losses of the financial system, and protecting the rights of depositors.
