Lebanese Bonds In Freefall As Politicians Scrap Over Budget

The price of Lebanese government debt is once again in freefall as investors eye political infighting in Beirut and rising tensions across the Gulf, the Financial Times reported. Spreads on 10-year Lebanese dollar bonds over US Treasuries have widened to the highest levels since at least 2011, according to Bloomberg data. The price of five-year Lebanese credit default swaps, bought as a form of insurance against non-payment on the bonds, hit 921 basis points this week, a fifth higher than levels at the turn of the year. Widening spreads suggest “that investors are coming round to our view that the authorities will need to resort to debt restructuring,” wrote Jason Tuvey, senior emerging markets economist at Capital Economics. Lengthy political squabbling is typical of Lebanon’s post-civil war governance, which is based on sectarian power-sharing. The country has never defaulted on a bond. But as Beirut’s debt has ballooned to about 160 per cent of gross domestic product — the world’s third highest, by that measure — and its economy has stalled, investors fear time is running out. Read more