5 days ago
Lebanese eurobonds rally extends following state arms monopoly decision
BEIRUT — Lebanon's eurobonds — the country's dollar-denominated debt securities — surged 11 percent over the past week, closing at 19.75 cents on the dollar Wednesday, their highest level in two years.
The rally followed the government's historic decision to enforce a state monopoly on arms, said Saeb al-Zein, former hedge fund manager and emerging markets financial analyst.
The country's battered bonds have been rising since late September 2024, coinciding with the escalation of the Israel–Hezbollah conflict into a full-blown war. At the time, their value jumped from 6.2 cents to current levels.
Investors had been betting on Hezbollah's weakening and an improved economic outlook following the Nov. 27 cease-fire, which ended the year-long cross-border fire exchange.
'A similar rally took place when the Assad regime fell in December,' said Zein. 'This current surge is also politically driven, as investors anticipate greater state control over its own destiny.'
'Investors typically look three to six months ahead, so they're still betting on Lebanon as a country,' he added. 'With improved security, we could see more investors coming in and more capital inflows.'
'If we can get our house in order politically, I'm confident the economy will follow, driven by a thriving private sector,' he said.
Lebanon defaulted on its sovereign debt in March 2020 for the first time in its history. A restructuring agreement with eurobond holders has yet to be negotiated.
In December 2024, Goldman Sachs forecasted the recovery value of these debt securities to average 24.6 cents on the dollar in a 'base-case restructuring' scenario — the outcome it deemed most likely.
However, 'the actual recovery value will hinge on how the Parliament advances in addressing the gap resolution law, IMF negotiations and the fund's level of involvement,' Zein noted.
