21 October 2019 by jbchevrel
Lebanon 5y CDS widened another +40bp to the 1300bp mark, and the CDS curve inverted a tad more. We now have -350bp of inverted curve between the 1y point and the 5y point. In cash, the Eurobond yield curve is increasingly inverted. This was as the government struggles to quell nationwide protests (100ks demonstrating in the w/e) against worsening economic conditions and the perceived corruption of the ruling class. Foreign investors are getting more concerned about the ability of Lebanon, amongst the world’s most indebted countries, to fix its finances and avoid a default. The spread between $ 21s and $ 29s surged to a record 10% today. The Hariri’s government announced measures (economic package) to calm the protests, among which halving the salaries of officials, overhauling the dysfunctional electricity sector and eliminating a ministry and other governmental bodies. Hariri also said that financial advisers study the privatization of telcos and he announced the gov has approved a 2020 budget with a deficit of 0.6% with no new taxes. All that had started with a proposal to hike the value-added tax and introduce a levy on Internet calls via apps such as WhatsApp. Lebanese people are extensive users of WhatsApp. It is worth recalling that Lebanese people have historically built big communities abroad, with 6 million + in Brazil, 2 millions in the US, 1 million in Argentina, vs a Lebanon population of around 6 million.